Monday, January 31, 2011

January 2011

Indian mutual fund houses have seen a higher drop in their AUMs than the foreign fund houses have, according to data available on the SEBI website. As of December 31, 2010, Indian mutual fund houses' average assets under management (AUM) fell by 10.4% while that of foreign fund houses fell by 2.6%. The industry average AUM, which stood at Rs. 6.74 lakh crore, for the same period saw a drop of 9.6%. Foreign fund houses account for about 11% of the average AUM of the industry, and domestic fund houses 89%. The proportion in terms of number of folios is also the same. The foreign fund houses' average AUM totalled Rs 72,494.54 crore and that of the Indian fund houses Rs 6,01,905.88 crore, both as on December 31, 2010. Of the 43 fund houses, 11 are foreign fund houses. One reason for the difference in AUM fall between the two categories of fund houses is the liquidity tightness that 2010 experienced. Generally, foreign fund houses have more exposure to the equity side of the market than to the liquid side. This is why they saw a lesser drop in their AUMs as the equity markets performed better than the debt and money markets. The average AUM of Franklin Templeton, the largest foreign fund house in the country, and Fidelity, the second largest foreign fund house, increased by about 18% and 15% respectively.

The year 2010 saw Shinsei Mutual Fund completely exiting the mutual fund business in India and selling it to Daiwa. The joint venture between Sundaram Mutual Fund and BNP Paribas came to an end, with Sundaram continuing on its own and BNP Paribas taking over Fortis Mutual Fund. AIG Global Investment Group Mutual Fund, in order to cut costs and repay debt, has reportedly sold its Indian mutual fund business to Pinebridge Investments (an erstwhile AIG subsidiary). Despite the struggling mutual fund industry in India, interest and the potential in the India growth story will keep foreign fund houses desirous of entering the industry. However, many of these players will need to have a long term outlook given that margins are likely to be under pressure.

Piquant Parade

The Centre has appointed Mr U.K. Sinha as SEBI's next Chairman. Mr Sinha will have a term of five years from the day he assumes charge. The incumbent Chairman, Mr C.B. Bhave, is due to retire on February 17, 2011. Mr Sinha is the CEO of UTI Asset Management Company. He is also the Chairman of the Association of Mutual Funds in India.

As part of the initiative, christened as Swatantra, two UTI knowledge caravans will travel across Kerala, Karnataka, and Tamil Nadu, starting from Thiruvananthapuram, to spread awareness about financial planning. For this, UTI Mutual Fund has tied up with HDFC Bank, the largest distributor of mutual fund products, which would arrange the investor meets across rural areas in Southern India. During this journey, more than 1,300 investor meets will be conducted in 300 cities in 100 days with an estimated 15 lakh participants. The initiative is in partnership with the Ministry of Corporate Affairs. The investor education initiative would see UTI Mutual Fund officers and advisors talking about financial literacy that would help individuals take prudent investment decisions.

Regulatory Rigmarole

SEBI has defined the activities that stock market intermediaries cannot outsource to third parties. In a discussion paper on outsourcing put up on its website, SEBI sought comments and suggestions on six issues such as principles for outsourcing, activities that can be outsourced, activities that cannot be outsourced, entities to whom the activities can be outsourced, the terms of outsourcing and responsibilities and obligations of the intermediary and the third party in respect of the outsourced activity towards clients, regulator, and market. Depository Participants cannot outsource their checker activities. Registrar and Transfer agents cannot outsource their record-keeping and PMLA obligations. Banks have to clear financial instruments on their own and brokers have to manage client orders, pay-in and pay-out of funds and securities. Similarly, PMS providers and AMCs have to manage client funds while Merchant Bankers cannot subcontract due diligence, issue pricing, and supervision of other intermediaries to third parties.

SEBI has laid out nine principles that would be applicable to outsourcing. Intermediaries are expected to put in place a comprehensive policy on outsourcing – whether and how any particular activity would be outsourced. Intermediaries must put in place a comprehensive risk management programme to address the outsourced activities and their relationship with their vendor. Intermediaries have to ensure that all obligations to customers and regulators are fulfilled and outsourcing does not hinder regulatory supervision. They must also conduct proper due diligence while selecting the vendor and periodically review performance. Outsourcing relationships have to be clearly laid out in terms of expectations, rights responsibilities, confidentiality and termination describing material aspects in the form of a contract. Intermediaries and third parties are also expected to maintain and periodically test their facilities for contingency and disaster recovery. Care must be taken to ensure that confidential information is not leaked by third party. Regulators have to view outsourcing as an integral part of their ongoing assessment of intermediaries. The final point was that regulators have to take cognisance of the risks that outsourcing may end up in the hands of a select few third parties. Once implemented, there would be a clear demarcation of activities that can and cannot be outsourced by intermediaries.

India’s labour ministry wants the finance ministry to provide a guarantee for equity investing. It wants a guarantee of capital safety, as well as guaranteed returns. Apparently, it had sought these guarantees in response to the latter’s demand that a small part (up to 15%) of the EPFO funds be invested in equities.

The mutual fund industry seems to be visibly tense. The AUM slipped to Rs 6 lakh crore in December 2010 from Rs 8 lakh crore in April 2010. Similarly, the folio numbers (investor accounts) have declined by more than seven lakh. Companies and financial institutions are major investors in mutual funds. Almost half or Rs 3.86 lakh crore of AUM consists of liquid and income schemes. The AUM of retail investors, who primarily invest in equity schemes, is at Rs 1.81 lakh crore. Equity, balanced, and ELSS schemes together add up to Rs 2.27 lakh crore of AUM. If some corporate money moves out of the industry, that is not a cause for concern. But the loss of retail folios is in the region of two lakh folios per month for the last eighteen months. These are largely retail folios consisting of equity, balanced, and ELSS schemes. Fund officials have attributed the loss in folios to redemptions by investor due to market appreciation but the continuous loss of folios remains an area of concern. A concerned commencement of 2011…

Monday, January 24, 2011

January 2011

The average assets under management (AUM) for the October-December 2010 quarter has declined 5.31% to Rs 6,75,376 crore as against Rs 7,13,281 crore for the September 2010 quarter as per the data released by the Association of Mutual Funds in India (AMFI). Interestingly, in the previous quarter, AAUM had constantly risen between July and September 2010 after a fall of over 15% in June 2010 due to auctions for 3G and broadband wireless access spectrums. This is the first time that the mutual fund industry is disclosing the AUM data on a quarterly basis. Till September 2010 the mutual funds used to disclose AUMs on a monthly basis.

All the top five fund players lost assets in the December 2010 quarter. Birla Sun Life Mutual Fund was hit the hardest, with the fund house losing over 14.43%, while Reliance Mutual Fund, HDFC Mutual Fund, and ICICI Prudential Mutual Fund lost over 5%. UTI Mutual Fund performed slightly better, with assets declining 3.3%. The average assets in the October-December 2010 quarter of Reliance, HDFC, ICICI Prudential, Birla, and Franklin Templeton stood at Rs 1,02,066 crore, Rs 87,883 crore, Rs 65,840 crore, Rs 57,689 crore, Rs 39,442 crore respectively. As per the data compiled by the Business Standard Research Bureau, out of the 42 players in the mutual fund market, only 10 could manage to add fresh assets in their kitty. These players include Benchmark Mutual Fund, Axis Mutual Fund, Mirae Assets Mutual Fund, and Sundaram Mutual Fund, among others.

Mutual fund industry, particularly the retail segment, has shown deceleration in growth. It is an area of concern for the industry. FII inflows and HNI investments have shown rapid growth between July 2009 and December 2010, but the retail segment has lagged behind. The mutual fund industry has been losing 2 lakh retail folios every month for the last 17 months. Between April and December 2010 alone, over Rs 17,000 crores were redeemed by investors and between September and December 2010, assets under management fell by over 5%. Industry body AMFI says that over 30 lakh retail investment folios have been lost since August 2009, when the ban on the entry loads was implemented – that is around 2 lakh folios every month. In July 2009, total retail folios through ELSS, Equity and Balanced schemes stood at 4.47 crores. This has fallen to 4.17 crore folios by December 2010.

The entry load ban, which commenced from August 1, 2009, has impacted fund advisory business. Several mutual fund distributors are finding it hard to resist the lure of selling other products, mainly unit-linked insurance plans, which offer as much as 8-10% as commission. But distributors are allowed to charge fees upfront from investors, which is hard unless the advice they give is top-class. This prevented distributors from selling mutual funds. The number of mutual fund investment advisors registering with AMFI has plunged 65% from the peak in 2008, as the abolition of entry load has taken the sheen off the profession. In the April-June quarter of 2010, only about 6,500 people sought the AMFI Registration Number (ARN), mandatory for selling mutual funds, against 17,132 in the July-September quarter of 2008. An average of 4,200 candidates got ARNs in the September and December quarters of 2010. The number of people getting AMFI registrations rose by a mere 5% over the past two years. Going by AMFI data, there are 81,390 ARN holders in India as against 77,562 in 2009 and 70,679 in 2008.

Piquant Parade

Daiwa Asset Management Co Ltd (DAM), the asset management arm of the Japan-based Daiwa Securities Group, has launched its business in India. In December 2010, Daiwa Securities Group completed the acquisition of Shinsei Asset Management (India) Pvt Ltd., which has been renamed Daiwa Asset Management (India) Pvt Ltd. DAM manages over 300 funds investing in various asset classes with assets under management of over $115 billion, as at the end of December 2010.

While Principal Financial Group (Mauritius) Ltd. is restructuring its joint ventures with Punjab National Bank and Vijaya Bank in India, Principal, Punjab National Bank, and Vijaya Bank continue to remain shareholders in Principal PNB Asset Management Company Pvt. Ltd. and Principal Trustee Company. Further both the partners, Punjab National Bank and Vijaya Bank, stay committed to distribute the products of Principal PNB Asset Management Company.

Fund houses are warming up to the idea of launching ‘goal series’ funds, which aim to create ‘savings’ pools to meet future expenses relating to higher education, housing, marriage, and retirement. Close on the heels of Fidelity Mutual Fund which recently launched a ‘children fund’, IDFC Mutual Fund, Peerless Mutual Fund, Axis Mutual Fund, Reliance Mutual Fund, and UTI Mutual Fund are planning asset allocation funds which focus on various life goals. Goal series funds typically invest in multi-asset class such as equities, gold, and debt. The idea is to emulate the insurance-style of marketing which put the onus of investments on the investor. This class of funds will be managed, taking into consideration the long-term needs of investors. A ‘marriage fund’, which could be redeemed in five to six years, will have a higher exposure to debt — about 35% on an average. Similarly, retirement funds, the corpus of which investors would need to dip into only after 10-15 years, will have a higher exposure to equity — about 85-90 %. Goal series funds will prompt investors to look at mutual funds as a long-term investment product which was not the case till now. Ordinary investors will understand these funds better. Regular fund products are very technical as they speak about strategies and performance. The ‘goal’ series will be based on financial planning.

Eight domestic equity mutual fund schemes, including SBI Magnum Contra, HDFC Equity, and Reliance Growth, are among the 25 best-performing open-ended equity funds in the world of the last decade, according to investment research firm Morningstar. These funds benefited from the 10-fold growth in total value of India's stock markets, led by a robust performance of one of the fastest growing economies in the world. The eight funds returned 31% to 38% on a compounded basis in the past decade. The Sensex returned 17.8% on a compounded basis during the 10 years. Russia's RTS fetched 28.6% and Indonesia's JSX Composite gave 24.4% returns during the period.

Large part of the money came as an opportunistic play to participate in the market rally, in earlier mutual funds in India. In the course of the last two years, the investors’ mind is changing. In the early part of 2008, there were about 30 lakh Systematic Investment Plans (SIP) accounts. Now, the industry runs close to 50 lakh SIP accounts which are growing month on month. Structural change in the industry is very important. With the increasing number of SIP accounts in the industry, there will be close to Rs 1 crore SIP accounts by the end of 2011.

To be continued…

Monday, January 17, 2011

January 2011

Race against time!

Mutual fund unit sales are sliding due to a variety of factors, including many regulatory developments in the last few years. Equity mutual funds, through 24 NFOs, collected a mere Rs 3,000 crore in 2010, down by over 57% from 2009 and lowest in four years. 2007 witnessed 64 equity NFOs collecting Rs 39,327 crore; 48 equity fund offerings in 2008 collected Rs 12,722 crore, and 33 NFOs in 2009 collected Rs 7,284 crore. To fast-track plans, SEBI directed mutual funds in July 2010 to reduce their NFO subscription period from 30 days to 15. Moreover, unit allotment, refunds, and statements of account should be posted to investors within five business days from the closure of the NFO. Fund houses are finding it difficult to complete the unit allotment process in five days. This is more so in the case of applications coming from far-flung areas. Most funds have stopped selling new schemes in smaller towns and stick to only cities and just a few top distributors who get wealthy clients. Distributors are not willing to sell new schemes at commissions as low as 50 to 70 basis points (a basis point is 0.01 percentage point). Since the abolition of entry loads, there is hardly any financial incentive for a distributor to sell NFOs. Mutual funds are seeking at least two weeks' time to credit investors with the units in new launches as the industry battles the worst inflows from new schemes in four years.

January 2011 NFONEST is no different… Only two NFOs are on offer.

Birla Sun Life Capital Protection Oriented Fund – Series 3 & Series 4
Opens: January 10, 2011
Closes: January 24, 2011

Birla Sun Life Mutual Fund has launched two new funds - Birla Sun Life Capital Protection Oriented Fund - Series 3 and Series 4. Both the funds will be closed ended capital protection oriented funds with the duration of 36 months from the date of allotment of units. A comparatively large portion of your money will be invested in high quality bonds while the remaining portion (up to 20%) will be invested in equity markets for better returns on the total investment. The investment objective of the funds is to provide capital appreciation linked to equity market with downside protection at the end of tenure. Yet, the funds give you tax efficient returns (compared to regular FDs) by way of investing a small portion of the corpus in equity and equity related instruments in secondary markets. You can also take advantage of the triple indexation benefits with these funds as there is no TDS applicable here! This Capital Protection Oriented Mutual Fund comes with the rating of mfAAA (so) by ICRA which means that there is a highest degree of certainty for the payment on the face value of the fund. These funds are just oriented towards protection of your capital and do not guarantee any returns and hence investing in these funds is as risky as investing in any other mutual funds available. The funds will be benchmarked against Crisil Balanced Fund index. The funds will be managed by Mr. Satyabrata Mohanty.

MOST Shares M 100 ETF
Opens: January 12, 2011
Closes: January 24, 2011

MOST Shares M 100 ETF is the first exchange traded fund in India, which tracks the performance of the midcap segment of the broader stock market. The ETF seeks to achieve its goal by investing in securities constituting the CNX Midcap Index in the same proportion as in the Index. The ETF will invest at least 95% of its total assets in the securities comprising the underlying Index. The ETF may also invest in debt and money market instruments to meet the liquidity and expense requirements. The ETF seeks investment returns that correspond to the performance of the CNX Midcap Index, subject to tracking error (less when compared to index funds). MOSt Shares M100 ETF will be listed on the NSE. The Benchmark index for the ETF will be CNX Midcap Index. The fund manager of the scheme is Mr. Rajnish Rastogi.

Baroda Pioneer Banking and Financial Services Fund, Peerless Infrastructure Fund, and ICICI Prudential Multiple Yield Fund - Plan A to F are expected to be launched in the coming months.

Monday, January 10, 2011


January 2011

Mutual funds offer a potpourri of many asset classes. So it is only natural that a number of hybrid funds have emerged to address varying investor needs. One such hybrid offering is the balanced fund. With its genesis dating back to the late twenties in the international investment market, a balanced fund invests in both equity and debt markets. It is best suited for investors who intend to benefit from the upside of equity markets without being very aggressive. In the backdrop of a sharp volatility in the Indian stock market, balanced funds offer a safer way of investing.

While a majority of the 2010 GEMs have maintained their balance, Magnum Balanced and Franklin Templeton India Balanced seem to have lost their equilibrium, and have been shown the door. Reliance Regular Savings Fund and Canara Robeco Fund have made a well-deserved entry and have earned the esteemed status of ‘GEM’ in 2011.

HDFC Prudence Fund Gem

Stable Sprinter

One of the oldest schemes in the balanced funds basket, HDFC Prudence Fund has proved its mettle in terms of its performance during the various market phases. Despite being a balanced fund, HDFC Prudence does not deprive investors of gains during an equity rally. Adept calls in debt have not only provided a hedge during market corrections but actually helped the fund generate alpha returns, when compared with the bellwether indices. The fund manager has no problem moving against the herd, as reflected in his picks. He invests in good quality businesses, remains diversified and steers clear from richly valued investments. Financial services, energy, and technology are the top three sectors in the portfolio accounting for 34% of the total portfolio. 51% of the fund’s portfolio is in large caps. HDFC Prudence returned 21.25% over a one-year period, way ahead of the 11.73 % return of category. A SIP in HDFC Prudence over the last ten years would have yielded 30% compounded annual return — a feat very few equity-oriented funds have achieved over this period. The expense ratio is 1.82% and the portfolio turnover ratio is 34.29%. The fund’s assets under management swelled to over 75% in the last year, with the AUM standing at Rs 5709 crore at present. This suggests that it has been seeing continuous inflows, contrary to the broader trend of schemes facing redemption pressure. HDFC Prudence is a class act. It sprints like an equity fund but delivers the stability of a balanced fund. Overall, investors cannot have a better option than this. The fund would fit the core portfolio of any equity investor. Continuity of the fund manager, unmatched returns, and optimum stability make it the right fund for the long-term.

Sundaram Balanced Fund Gem

Cost-effective Safety Net

This Rs 70 crore fund has earned a return of 15.6% over the past one year. The fixed income portion of the fund is largely invested in corporate bonds followed by government securities. The equity component accounts for 41.4% of the assets and is spread across the cap curve and sectors. The top three sectors, accounting for 31% of the portfolio, are financial services, energy, and services. 58% of the portfolio is in large caps. The expense ratio of the fund is a mere 0.49% while the portfolio turnover ratio is as high as 720%.

DSP Black Rock Balanced Fund Gem

The Conservative Champion

Most of the equity investments in large-cap stocks, relatively lower risk, and the ability to bounce back from tough situations make it one of the better balanced funds. The fund's track record over the last 10 years across market cycles has been quite steady. The top three sectors of this Rs 793 crore fund are financial services, energy, and technology, contributing 31% to the portfolio. The one-year return of the fund is 11.24%. Over one-, three- and five-year timeframes, the fund has managed to better the performance of its benchmark — Crisil Balanced. DSPBR Balanced has generated a compounded annual return of 20.9% over a five-year period, placing it among the top few funds in its category. Despite the highly diversified portfolio, the fund manager does a large amount of churning. The expense ratio is 2.08% and the portfolio turnover ratio is 250%. DSPBR Balanced may be a suitable fund for investors with an average risk-appetite. Exposure through the SIP route may help combat volatility better. Though the fund over the years had dabbled in various debt instruments, it largely maintains a conservative stance on the debt side. A good bet for the conservative investor.

Reliance Regular Savings Fund In

Concentrated Aggressiveness

Reliance Regular Savings Balanced Fund failed to demonstrate a superior performance in the initial few years of its inception. However, in the past three years, it has outperformed the market thereby establishing itself as a strong contender among its peers. It has not only delivered more than average returns during the market run-ups, but also displayed resilience during the market crash. The fund’s asset base has seen a surge from just over Rs 20 crore to nearly Rs 806 crore now. Being equity-oriented hybrid scheme, Reliance Regular Savings Balanced Fund has a leeway to go up to 75% in equity. However, it has not really touched that limit. On the debt side, the fund has largely had cash and call money. However, since February 2010 the fund has taken an exposure in debt paper like certificate of deposit and commercial papers. Historically, the fund had a condensed portfolio of less than 20 stocks within the equity portfolio, which is now diversified to 30 stocks limiting the exposure in a particular stock to just about 5%. The fund has also been increasing its exposure to large cap stocks, with 46% at present. Over a one-year period, the fund has clocked compounded annualised return of 17.76% and outpaced its category average by 6 percentage points. The expense ratio of the fund is 1.85% and the portfolio turnover ratio is 84%.

Canara Robeco Balanced Fund In

Costly Cushion

The one-year return of the fund is 13.46% as against the category average of 11.73%. Over the 5-year period ended July 31, 2010, the fund has delivered an annualised return of 22% (category average: 16%). On the fixed income side, the fund manager takes no risk at all. In its past, it dabbled with low quality paper, but that is no longer the case. On the equity side, the selection is more of bottom-up stock picking. The aim is to generate alpha on the way up and protect investors on the way down. In the market crash of 2008, the fund was able to shield its investors better in three out of four quarters. Moreover, 72% of the portfolio is in large caps with the top three sectors concentrated in energy, financial, and financial services sectors. The expense ratio of this Rs 186 crore fund is high at 2.39% with a very high portfolio turnover ratio of 272%.

Monday, January 03, 2011

January 2011

Balanced is better

What matters in long term investing is identifying consistent funds with balanced risk-adjusted returns and not what is “in” or “out” of fashion.

Almost all of us want to achieve a fine balance in everything we do in life. It is difficult for most people to dispassionately act on their investments. This is where balanced funds pitch in.


The unique proposition of spreading investments among two broad asset classes is hard to find in other types of funds. The higher equity allocation gives these funds the opportunity for high growth, while the debt component provides a cushion when the equity component fails to perform. At the same time, the same debt allocation pulls the fund's return lower during a bull run, since these funds are not fully invested in equities. The best balanced funds keep allocation flexible and open to changes as demanded by market conditions (but subject to regulations).

Right side of the balance…

Advantages abound in balanced funds.

Switching: Their key advantage is the ability to switch from a high equity allocation when the market is bullish to low equity allocation when the market turns bearish.

Diversification: These funds offer diversification in the true sense, with a portfolio of stocks and bonds, thereby, offering a blend of growth and safety.

Less volatility: Balanced funds have the lowest downside standard deviation, a measure of volatility.

Hassle-free: You do not have to take the trouble of managing an assortment of investments yourself. One fund does it all.

…and the left

But, is there any downside to balanced fund investing? Yes, there is.

Uncertainty in asset allocation: Since there is both the equity and debt component in the portfolio, and their performance is not disclosed separately, you are not sure about the performance of the equity and debt portions. It can be that the equity portion is doing well but the debt portion may give a mediocre performance. One can never be sure of this. One cannot specify the equity-debt mix. This will be determined either by the law or the fund house.

Active-management risk: The active-management risk can get amplified because the fund's exposure to equity or debt is a function of the fund manager's view about the direction of equity markets.

Objective mismatch: Such funds may have bonds of lower tenure. Long-term bonds earn significantly more than short-term ones.

Scintillating secular growth

Between December 2007 and 2010, the average equity-oriented balanced fund posted 4.76% returns compared to the 1.72% earned by the equity diversified category. Astute stock picking was certainly behind this stellar performance. An aggressive exposure to small- and mid-cap stocks helped HDFC Prudence grow by 29.98% in the past one year, which is better than what the average equity fund earned during the period. But much of the credit also goes to the asset allocation mix that balanced funds have to follow. Equity funds have to mandatorily invest up to 80% of their corpus in stocks. On the other hand, equity-oriented balanced funds can reduce their exposure to stocks to as low as 40% of their portfolio. This flexibility of asset allocation allowed balanced funds to pare their equity allocation during the 2008 meltdown and protect themselves against the downside. Reliance Regular Savings Balanced, the best performing hybrid fund in the past three years, has churned its portfolio considerably.

An analysis of the top three funds in the balanced fund category and returns in the last five years shows that Rs 100 invested five years ago in HDFC Prudence Fund (G) would have become Rs 281 now, Rs 100 invested five years ago in Canara Robeco Balance (G) would have become Rs 265 now, and Rs 100 invested five years ago in DSP BlackRock Balanced Fund (G) would have become Rs 261 now. HDFC Prudence Fund (G) has invested 71.40 % in equity, Canara Robeco Balance (G) has invested 69.33 % in equity, and DSP BlackRock Balanced Fund (G) has invested 71.18 % in equity. How much can they fall in full fledged bear market? Between Jan 1, 2008 and Nov 1, 2008, HDFC Prudence Fund (G) lost 45 percent in NAV, Canara Robeco Balance (G) lost 43.3 percent in NAV and, DSP BlackRock Balanced Fund (G) lost 39.3 percent in NAV. But still they have given a return of more than 160% (absolute in last 5 years).

Cushion for the core

The Sensex is running like a speeding train and you want to take full advantage of the bullrun while avoiding the risks. You cannot totally avoid the risk but you can go for medium risk options like balanced funds. For conservative investors, balanced funds are a sensible balancing act that lets them sleep better in turbulent times. A balanced fund is best as a core investment for investors who want exposure to equities but have some lingering concerns about them. With a typical mix of around 60 percent stocks and 40 percent fixed income, balanced funds split the difference between growth from stocks and income from bonds. Each portion has different managers, providing an investment that functions like two separate funds in one. Investing in this product helps to achieve your goals safely. There is cushion from investing in debt which creates minimum return for investors. For some investors, this risk-reducing hybrid provides one less thing to worry about. For others, however, it represents just half a loaf because it will never supply the euphoric results of a rousing stock market rally. Being cautious is smart!