Birla Sunlife India GenNext Fund - Aspirational Value

India enjoys a unique demographic advantage in the world today. The country has more than 50 per cent of its population below the age of 25, and more than 65 per cent hovers below the age of 35. It is expected that in 2020, the average age of an Indian will be 29 years. Hence, India has the highest young population mass in the world. The younger, newly-employed generation (GenNext) is also growing in size, and has markedly different habits, lifestyles and attitudes in comparison with other segments of the population. Growing consumerism is translating into a surge in demand for the products of companies that are catering to this segment of our population.

This phenomenon is likely to be sustainable, since it is resultant from attitudinal changes and lifestyle aspirations. Historically as well as globally, a strong demand has been the single biggest factor for growth in the revenues of companies. Birla Sunlife India GenNext Fund is our choice for the Fund of the Fortnight this time. This fund intends to benefit from the huge opportunity that is being created as a result of GenNext’s emergence as the largest population segment in India.

Birla Sunlife India GenNext Fund targets growth of capital by investing in equity/equity-related instruments of companies that are expected to benefit from the rising consumption patterns in India, which, in turn, is getting fuelled by high disposable incomes of the young generation (GenNext). It invests in companies that are engaged in manufacturing products or rendering services that go directly to the consumer and which have a distinct brand identity.

This is a diversified fund with a Mid-Cap bias, with 34 per cent invested in Large-Cap stocks and 66 per cent in Mid and Small-Cap stocks. The fund is fairly concentrated, with 60 per cent of the portfolio invested in three sectors, and FMCG alone accounting for 28 per cent. Earlier managed by Jayesh Gandhi, since Sep 2007 the fund is managed by Sanjay Chawla, who has an overall experience of 22 years, with over 15 years in equity research.

Launched in July 2005, the fund has generated a CAGR of 14.9 per cent. The fund has consistently out-performed its category average, both in bull as well as bear markets. In comparison with its benchmark, the fund has significantly outperformed across all time periods. In the last five years, it has generated a CAGR return of 11.05 per cent, as compared to 6.62 per cent by S&P CNX Nifty. In terms of AUM, the fund is relatively small, with an AUM of `88 crore. The stocks in its portfolio range across various sectors, like FMCG, media and entertainment, banks, telecom, retail brands like Shoppers Stop, airlines, travel agencies, pharma, etc.

The Indian economy has seen a paradigm change in consumption habits in the last decade. This pattern is fuelled not only by the opening up of the Indian economy, but also due to the integration with global markets. The rising income levels in India are primarily guiding the high-value consumption patterns. The young, educated masses are earning well and spending big. Hence, a fund capitalising on this theme could provide a substantial upside to an investor’s portfolio over the long term. However, as this is a thematic fund, we would recommend investors not to allocate more than five to 10 per cent of their equity portfolio to this fund.