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Last Updated: April 24, 2006 15:35 IST
Taurus Starshare is a fund which has frequently featured in various weekly and monthly top performers' lists. At Personalfn, we have also received queries from investors wanting to know more about the fund and its prospects.
For starters, the fund is called "Taurus The Starshare", and is an open-ended diversified equity fund from Taurus Mutual Fund (launched by Credit Capital Asset Management Company). The fund is benchmarked against the BSE 200 and has been in existence in its open-ended avatar since January 1999.
We decided to face-off the fund vis-�-vis some of our recommended diversified equity funds and find out how it fares.
| Diversified Equity Funds | NAV (Rs) | 3-Mth (%) | 1-year (%) | 3-year (%) | 5-year (%) | Std. Dev. (%) |
| TAURUS STARSHARE | 35.02 | 23.9 | 87.7 | 83.6 | 45.1 | 7.31 |
| HDFC [Get Quote] TOP 200 (G) | 94.91 | 17.5 | 81.3 | 76.5 | 49.0 | 5.65 |
| SUNDARAM GROWTH (G) | 61.67 | 25.0 | 83.0 | 70.7 | 44.0 | 5.73 |
| PRINCIPAL GROWTH (G) | 47.05 | 19.8 | 74.4 | 68.7 | 42.3 | 5.47 |
| BSE 200 | 17.1 | 62.0 | 57.8 | 34.3 |
Clearly, Taurus Starshare Fund (TSF) is no push-over on the returns parameter. The fund has clocked a growth of 83.6% CAGR over the 3-year period. The other funds i.e. HDFC Top 200 (76.5% CAGR) and Sundaram Growth (70.7% CAGR) are comfortably outperformed by TSF.
A similar picture emerges over the 1-year period. TSF (87.7%) surfaces as the top performer; albeit the margin of outperformance drops. Sundaram Growth (83.0%) and HDFC Top 200 (81.3%) come in at close second and third positions respectively.
However, what caught our eye were the Standard Deviation figures. Standard Deviation highlights the element of risk associated with the fund; a higher Standard Deviation denotes a higher degree of risk. TSF (7.31%) has exposed its investors to a greater degree of volatility vis-�-vis peers -- Principal Growth (5.47%) and HDFC Top 200 (5.65%).
TSF's stock portfolio reveals more about the fund's investment style and perhaps the source of the rather inordinately high volatility. As on March 31, 2006, the fund's top 10 stocks accounted for 77.9% of its assets. The top holding i.e. JP Associates accounted for nearly one-third of the corpus.
Furthermore, such a stock holding pattern is not an aberration, it is something we have observed consistently over a period of time. At Personalfn, we believe that a diversified equity fund should hold no more than 40% of its assets in the top 10 holdings; a top-heavy portfolio can make the fund a candidate for volatility.
| Stocks | % of Assets |
| JP Associates | 31.9 |
| Crompton Greaves [Get Quote] | 19.8 |
| New Delhi Television [Get Quote] | 5.0 |
| Indian Rayon Industries | 3.7 |
| Ballarpur Industries [Get Quote] | 3.7 |
| CEAT | 3.5 |
| Alps Industries [Get Quote] | 3.4 |
| TISCO [Get Quote] | 2.7 |
| SRF | 2.1 |
| Raymond | 2.0 |
| Total | 77.9 |
Conversely, our recommended funds, i.e. Principal Growth (26.5% of portfolio in the top 10 holdings), Sundaram Growth (34.7%) and HDFC Top 200 (44.0%) had holdings in line with our benchmark.
While the importance of holding a well-diversified portfolio cannot be overstated; a market scenario like the present one presents a slightly different proposition. At a time when equity markets are experiencing a secular bull run and stock prices across sectors are witnessing a run-up, taking on a greater degree of risk can prove to be more profitable.
Funds like TSF can capitalise on the market conditions by holding concentrated portfolios and taking on higher risk. However, such performances only reveal a part of the true picture.
Funds with concentrated portfolios are exposed during a downturn in markets and are often the worst performers. Such traits can be seen in the performance of sector-specific funds.
These funds typically pitch in impressive performances in short-bursts when the underlying sector hits a purple patch. However a downturn in the sector spells doom for these funds. "Diversified" equity funds with concentrated portfolios can similarly be caught on the wrong foot during a downturn in markets.
We have always maintained that equity-oriented investments should be made over a long-term horizon i.e. at least over 3-5 years. It is over such time frames that investors can truly reap the benefits of their equity investments.
Investors must treat impressive performances clocked over shorter time frames as an aberration at best. As a result, it is imperative that investments be made in avenues, which are equipped to deliver over the long-term horizon. Equity funds with highly concentrated portfolios certainly don't fall in this category.
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