How did this Value Fund generate 114% returns?

Value funds are back in action in the last six months. Value stocks have outperformed their growth peers after a long underperformance in the last two years. Many value funds which seemed to have lost their charm in the past are seem topping the return charts in one year. One such scheme is IDFC Sterling Value Fund. With 114% returns in one year, the scheme has outperformed its peers by a huge margin. Here's a look at the performance of the fund over the years: 1-year returns (%)3-year returns (%)5-year returns (%)IDFC Sterling Value Fund114.0512.6317.84Value fund category75.2812.7315.23Benchmark64.8814.7515.40Compared to the average allocation of the value category, the scheme has a higher allocation to segments like construction, FMCG, automobile, chemicals etc. The fund is underweight on energy and financial stocks. The scheme is jointly managed by Anoop Bhaskar and Daylynn Pinto. Here are the top five stocks by allocation in the fund's portfolio: StocksAllocation (%)ICICI Bank4.23Deepak Nitrite3.62JK Cement2.93Gujarat Gas 2.83KEC International2.65Fund manager speaks:"Our belief is that value as a strategy will continue to outperform as long as economic growth continues to rebound driven by various forms of fiscal and monetary stimuli announced across the globe. Additionally, the debate on inflation continues to be a tug of war between value and growth investors and will be very important in predicting a longer term trend," says Daylynn Pinto.Pinto adds, "Our view is that domestic cyclicals are possibly on the cusp of a multi-year growth cycle driven by stronger demand from infrastructure spending (recent budget focus) while Indian manufacturers (auto ancillaries, building materials and metals) are likely to benefit from better domestic and export demand as demand rebounds post Covid-19."He suggests that investors should always have a diversified portfolio with some allocation towards a value-based strategy. While investing in a value fund one should focus on the fund’s strategy and portfolio positioning. These funds may offer a better risk-reward proposition over long-term, especially as growth accelerates and inflation turns out to be more than transitory in nature, Pinto says. Mutual fund advisor speaks: Rushabh Desai, an AMFI-registered mutual fund distributor says that IDFC Sterling Value Fund is managed by experienced fund managers but can be highly volatile. "The fund's high beta portfolio and higher standard deviation indicates the fund has been highly volatile. The sectoral bets taken and the funds high allocation towards mid & small cap stocks tells that this fund will be highly cyclical. Even though the fund falls under the value category, it does not follow the traditional pure value strategy. Investors looking to invest in a traditional pure value strategy in the value category should avoid this fund," says Rushabh Desai.

from Economic Times https://bit.ly/3gxvDPT
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