Templeton India Growth Fund

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The first scheme launched by Franklin Templeton Mutual Fund, Templeton India Growth Fund commenced operations in India in August 1996. It is an open-ended diversified scheme that invests majority of its corpus in equity instruments. Debt instruments are considered only for the purpose of liquidity. Consequently, the fund can have an asset allocation of 85:15 per cent in equity and debt. According to the offer document, it follows a value-based investment strategy. The fund first identifies companies whose stocks are trading at lesser than their fair-value estimates. From the bargain list that the fund house has constructed, the real portfolio is then constructed.

The fund has been around for more than 12 years now. What makes it stand apart from other diversified equity funds is its consistent record of delivering reasonable risk-adjusted returns. It has yielded a compounded annual return of 20.01 per cent since inception. The fund has outperformed both its benchmark (BSE Sensex) and category average over all investment horizons.

The value-based investment strategy followed by the fund did not affect its NAV much during turmoil in equity markets witnessed in 2000 and 2001. It performed impressively when most other equity funds were washed out. The same trend is evident in the present market as well. The fund remains among the top performers in this timeframe.

The fund house has a strong process orientation, and the fund follows a bottom-up approach to stock picking. Its investment strategy of value investing is inherently risky, as the fund manager takes calls that go contrary to the market.

To generate market-beating returns, the fund manager also has to hold on to his stocks for a longer duration. According to the fund house, on an average, stocks will be held for five years. Hence, the fund manager has rarely made huge changes to the fund’s portfolio. Stock composition has stayed quite constant for the last two years. Even the fund’s portfolio turnover ratio (PTR, measured on March 2008) stands at just 16.05 per cent, which is among the lowest among equity schemes.

The fund has predominantly invested in large-cap scrips. Its average allocation to large-caps over the past one year stands at 66 per cent.