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What does it take for a fund to qualify as a good fund? Does the fund have to score on the returns front? Or should the fund make the grade by exposing investors to lower risk? Given that the term "good fund" is a subjective one, every investor will have different views on this issue. In our view, the fund needs to strike a balance between the two i.e. returns and risk i.e. it should be able to deliver a competent performance on the returns front at lower risk levels vis-�-vis its peers. DSP ML Equity Fund is one fund, which has consistently made the grade on our parameters and merits mention. What DMEF offers The value funds segment is a rather niche one in the Indian context, with only a handful of 'true blue' value funds in existence. Investments in value funds should ideally be made for a longer-than-average investment horizon. This will offer the undervalued stocks an opportunity to unlock value and deliver to their true potential. In our view, the ideal investment horizon for equities is at least 3-5 years, so for value funds, it should be longer than this period. To read detailed research reports on the best equity funds, subscribe to the FundSelect Launched in April 1997, DMEF has been in existence for over a decade now. It has a noteworthy track record to show for and ranks among the better performers in the value funds segment. The fund is positioned to invest upto 50 per cent in large cap stocks and the balance (50%) in mid cap stocks. This makes it well placed to benefit from the investment opportunities arising across market segments. The fund typically holds a well-diversified portfolio, both in terms of stock and sectoral allocations. This has aided the fund deliver an impressive showing on the risk parameters i.e. volatility control and risk-adjusted returns vis-�-vis peers. DMEF's present avatar is a far cry from its earlier days. Then, the fund was known for holding a concentrated portfolio and poor showing on volatility control front. But a change in its fund management team was instrumental in adopting a process-driven investment approach. The same paved the way for a judicious portfolio management style and a reversal in the fund's fortunes. How DMEF fares vis-�-vis its peers
(Source: Credence Analytics. NAV data as on October 1, 2007.) (Standard Deviation highlights the element of risk associated with the fund. Sharpe Ratio is a measure of the returns offered by the fund vis-�-vis those offered by a risk-free instrument) For the purpose of peer comparison, we have considered only those value funds, which have completed atleast 5 years in existence. DMEF has pitched in impressive performance on the net asset value (NAV) appreciation front vis-�-vis its peers. Over the 3-Yr time frame, the fund (56.4 per cent CAGR) has comfortably outperformed all the funds in the peer group. The scenario is not very different over 5-Yr time frame. DMEF (59.7 per cent CAGR) surfaces as the top performer yet again. The fund has also successfully outperformed its benchmark index i.e. S&P CNX Nifty across the 1-Yr, 3-Yr and 5-Yr time frames respectively. Volatility Risk-adjusted returns
The above graph bears testimony to DMEF's good showing as compared to its benchmark i.e. S&P CNX Nifty. Rs 100 invested in DMEF at inception (April 1997) would have grown to Rs 1,579 by October 1, 2007. Had the same amount been invested in the S&P CNX Nifty, it would have appreciated to just Rs 483. What should investors do?  More Personal Finance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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