Mani Govil turned RS Core Equity into a top-ranked mutual fund by selling most of the stocks held by his predecessor and adding shares of technology, health-care and energy companies.

Govil started running the $853 million fund in August 2005 after it had lagged behind 95 percent of its peers during the previous five years. He has since sold almost all of the stocks held by his predecessor, including Wachovia Corp., Lehman Brothers Holdings Inc. and Merrill Lynch & Co., which have plunged with the collapse of the subprime-mortgage market.
RS Core Equity has returned an average of 9.9 percent a year under Govil, beating 98 percent of funds that invest in large-company stocks, according to Morningstar Inc., the Chicago-based financial-information company.
``The fund needed a decisive turnaround,'' Govil, 38, said in an interview from his New York office. ``We completely changed the portfolio.''
RS Core Equity Fund, owned by San Francisco-based RS Investments, has three out of a possible five stars from Morningstar, which also assigns it a three-year Sharpe ratio of 0.55, compared with -0.07 for rivals. A higher Sharpe ratio means better risk-adjusted returns.
Morningstar puts the fund in its large ``blend'' category, which includes a mix of value and growth stocks. Value stocks are those deemed cheap on the basis of yardsticks such as earnings, while growth companies are those that increase earnings faster than peers. The fund identifies companies that have an edge over competitors, in terms of market share or new products, Govil said.
Govil was hired away from Mercantile Capital Advisors, a fund company now owned by PNC Financial Services Group Inc. At Mercantile, he was the co-head of equities and used a similar strategy to manage the Mercantile Growth & Income Fund. He earned a bachelor's degree in commerce from the University of Bombay in India, and an MBA from the University of Cincinnati.
The fund has gained 2.4 percent in the past year through Aug. 20, also beating 98 percent of the competition, Morningstar's data show, while keeping 17.4 percent of its assets in financial stocks, the worst performers of the Standard & Poor's 500 Index.
Govil's picks among financials include Goldman Sachs Group Inc., MasterCard Inc. and People's United Financial Inc. New York-based Goldman Sachs, which accounts for about 2.3 percent of the fund's assets, fell 8.4 percent in the past year.
MasterCard, the world's second-largest credit-card company and the fund's No. 2 holding at 3.9 percent of fund assets, surged 76 percent in the past year.
People's United, the largest New England-based lender, has dropped 5.4 percent. The Bridgeport, Connecticut-based bank accounts for about 3 percent of fund assets.
Govil sold Wachovia after the Charlotte, North Carolina- based bank spent $24 billion to acquire mortgage lender Golden West Financial Corp. in October 2006, at the peak of the housing boom.
Wachovia, which had losses of $9.11 billion in the second quarter, has fallen 74 percent since the Golden West purchase.
(Source: Bloomberg)