Investors can consider buying units of Reliance Growth. The fund`s consistent performance and ability to contain declines better than its benchmark as well as other mid-cap peers makes it a good investment option on a risk-adjusted basis.

With a one-year return of 40.5%, the fund has not only outpaced its benchmark BSE-100 but is also a good 8 percentage points above the diversified category average. The fund`s ability to withstand declines becomes clear if one were to look at its three-year returns, as it braved the 2008 market rout better than most peers. At 14%, its three years` compounded annual return has placed the fund among the top 10 diversified funds.

Suitability: Reliance Growth`s portfolio, despite a very large asset base continues to be tilted in favour of mid-caps. However, large-caps (funds with market capitalisation of over Rs 100 billion) still account for a good 40% of the total assets - higher than most other mid-cap funds. The fund may, therefore, be suitable for investors looking for mid-cap exposure without the high volatility that is typically tagged with this category.

On a risk-adjusted basis (measured by Sharpe ratio), Reliance Growth comes closely on the heels of HDFC Top 200, a large-cap fund. In the mid-cap space, next to IDFC Premier Equity, Reliance Growth finds place among funds that have returned high, adjusted for risk. This essentially means that the fund can be profiled as a scheme with average risk and above average returns.

Performance: Reliance Growth has a commendable track record since its launch in 1995, with a return of 29% annually. Over a five-year period too, the fund is the top performer in the mid-cap category, marginally outperforming peers such as Sundaram BNP Paribas Midcap and Birla Sun Life Midcap.

However, such returns may be hard to mimic from this point onwards, as strong rallies in the last four years have been followed by sharper declines. Besides, the fund`s relatively higher exposure to large-caps now, compared with its early years may also cap such heady returns. It is this exposure, which has in recent years resulted in the fund trailing some of its mid-cap peers.

That Reliance Growth is not as aggressive as its mid-cap peers is also evident from its more cautious cash calls, use of derivatives, diversified portfolio and less churning of stocks. These features though, have helped the fund contain losses much better than mid-cap funds. The fund has a yearly rolling return track record of beating its benchmark 85% of the times in the last four years, suggesting consistency in performance.

Portfolio: Reliance Growth has a highly diversified portfolio, which promises to provide some downside protection. Of its total holding, stocks in which it held less than one% accounted for 21% of its assets, reflecting the extent of diversification.

The fund holds offbeat set of stocks such as Radico Khaitan and Orient Paper & Industries. Besides, stocks with market capitalisation of less than Rs 25 billion account for one-third of the portfolio.

However, the key differentiating factor with other mid and small-cap funds is that stocks in which it has at least one% exposure are over Rs 10 billion  in market cap. Smaller stocks if any, account for less than one% individually and are unlikely to neither drive returns nor pull down performance.

The fund may be suitable for investors looking for mid-cap exposure without the high volatility.

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