GEMGAZE

January 2013

Balanced Funds – just the right mix

Are you one of those, whose heartbeat quickens or slows down according to market movement but who still wants to add the zest of equity returns to your portfolio? Then Balanced Funds are a perfect match for your portfolio as the funds offer the best of both the worlds. Their mandate allows them to invest in equities, which acts as a catalyst for the fund’s performance. The remaining can be allocated to debt and others, which offers a safety net, thereby, providing a right mix of aggression and defence in one fund. 

All the GEMs that withstood the rough weather of 2011 have gracefully retained the status of a GEM in 2012 too, thanks to their consistency and stability, not to mention the facelift of the equity markets.

HDFC Prudence Fund Gem

Outshines competition

HDFC Prudence Fund is one of the oldest and largest funds with an asset base of Rs 6239 crore and is spearheaded by one of the mutual fund industry’s renowned fund managers, Prashant Jain, since its inception in January 1994. Since he is associated with this fund from day one, it brings a lot of stability and consistency in the fund’s performance and portfolio management. The fund has given 21.57% annualised returns since inception. It has also managed to beat many of the only-equity funds in the long run and has provided the best risk-adjusted returns in the balanced fund category. HDFC Prudence Fund truly outshines the pack and is known for its ability to trounce the competition. Over the past 10 years, it has emerged as the best performer with an annualised return of 26% (category average: 18%) and has grabbed the first and second spot six times in annual returns. Such impressive statistics are backed by sound portfolio calls and astute stock selection. The fund earned a return of 29.17% in the past one year as against a category average return of 26.28%. The fund is highly diversified both in terms of sectors and stocks. It holds 123 stocks in its portfolio and the top three sectors finance, healthcare, and energy account for 35.1% of the portfolio. Less redemption pressure lends stability to its assets under management. This has allowed it to adopt a buy and hold strategy. On the debt side, it bet on corporate debentures and government securities rather than short-term instruments. In its debt portfolio too, the fund does not churn instruments too much, suggesting that it is looking at interest payouts (called accruals) from the instruments it holds. The portfolio turnover ratio is 31.49% and the expense ratio of the fund is 1.79%. However, the fund manager has astutely managed the equity portfolio wherein the market-cap allocation was equally divided among the large and mid-cap stocks to manage risk and returns. Thus looking at all these attributes, the fund seems a good bet even for conservative investors, who should take exposure to this fund through SIP.

Sundaram Balanced Fund Gem

Safe bet

Sundaram Balanced Fund has earned a return of 22.89% over the past one year as against the category average of 26.28%. The three-year and five-year returns are also a tad less than the category average of 7.39% and 2.69% respectively at 3.47% and 1.76%. The fund has 68% of its portfolio invested in equity, and the large-cap orientation of the fund with nearly 75% has enabled it to impart the much-needed safety to the portfolio in the midst of a volatile market. The debt component of Sundaram Balanced Fund comprises mainly of bonds and debentures. The equity component of the portfolio comprises of 35 stocks. This Rs 62 crore fund has 48% of the portfolio in the top three sectors, financial services, energy, and technology. The expense ratio of the fund is 2.5% while the portfolio turnover ratio is 18%.

DSPBR Balanced Fund Gem

Long-term diversifier

DSPBR Balanced Fund tends to spread its risk quite thin, given that there are 68 stocks in the portfolio across market cycles. Even the top 10-20 stocks have less than 4% exposure each. This apart, exposure even to individual sectors is not heavy either. No sector accounts for more than 10% of the portfolio, save the finance sector. DSPBR Balanced has a fairly high quality debt exposure, with the fund restricting its exposure to AAA and AA+ rated instruments. The top three sectors of this Rs 645 crore fund are financial services, energy, and services, contributing 36% to the portfolio. 74% of the fund’s portfolio is in equity and 24% in debt. 47% of the assets are in large caps. The one-year return of the fund is 25.85%, almost on par with the category average of 26.28%. The expense ratio is 2.2% and the portfolio turnover ratio is a massive 219%. But given its strong track record of over 12 years, during which it has bettered the returns of even standard indices such the Nifty, the fund may be suitable for an investor's long-term portfolio as a diversifier.

Reliance Regular Savings Balanced Fund Gem

Aggressive but mature

Aggressive equity bets combined with maturity has resulted in its consistent performance. The fund tends to take higher exposure to select stocks. The flexibility to change its investment character during bull runs with aggressive concentrated equity bets and shift to defensive and diversified equity holdings during bear phases makes this fund a compelling bet. The one-year return of this Rs 556 crore fund is 33.79% as against the category average of 26.28%. Returns of 10.10% and 8.54%, respectively, as against the category average of 7.39% and 2.69% during a three- and five-year period, reflects the fund's ability in stock selection. The fund has also outpaced its benchmark BSE 100 by six percentage points. The fund has invested 74% in equity and 22% in debt. Being a multi-cap fund, it has traditionally taken bets on mid- and small-cap stocks, to prop up returns. While such a strategy yielded returns in a bull phase, it has equally dragged performance during volatile markets. But in recent times, the fund has toned down its exposure to mid- and small-cap stocks and is now overweight on large-cap stocks at 59%. 42% of the portfolio is in the top three sectors, finance, healthcare, and technology. The fund has a very compact portfolio, and has in recent times been more aggressive in churning its portfolio with a portfolio turnover ratio of 113%. The expense ratio is 2.19%. The fund is managed by Mr Omprakash Kuckian.

Canara Robeco Balanced Fund Gem

Strong Contender

Canara Robeco Balanced Fund has had a tumultuous history, but is a strong contender with a good stock picking record. The fund has become much more diversified over time with stocks hovering around 50 - a radical change from allocation to a single stock touching 20% and commonly crossing 10%. What has become evident over the past few years is its ability to contain the downside. Last year, despite a fund manager change, the fund delivered quarterly returns ahead of the category during market run-ups and fell less when the reverse took place. Its strategy is to limit risks in equities by focussing on large-cap stocks. The fund's active strategy in debt, which accounts for a third of assets, has been the key to managing volatility in the last three volatile years. The one-year return of the fund is 26.81% as against the category average of 26.28%. 59% of the portfolio is in large caps with 37% of the portfolio in the top three sectors concentrated in finance, FMCG, and technology sectors. The expense ratio of this Rs 203 crore fund is 1.66% with a very high portfolio turnover ratio of 160%.