GEMGAZE

January 2017 

Balanced funds are excellent investment options for investors with moderate risk tolerance, since they give very good risk adjusted returns. It is very surprising why balanced funds are not nearly as popular as diversified equity funds, despite being around in India for nearly two decades. Balanced funds are essentially hybrid funds with both debt and equity in its portfolio mix, to balance the portfolio risk. These portfolios typically hold up to 70% of their portfolio assets in equities and the balance in fixed income. On a risk adjusted basis, balanced funds have delivered excellent returns compared to other equity fund categories.

All the GEMs from the 2016 GEMGAZE have performed reasonably well through thick and thin and figure prominently in the 2017 GEMGAZE too. 

HDFC Prudence Fund Gem

HDFC Prudence Fund is the largest fund in the category with assets amounting to Rs 14,636 crore. HDFC Prudence, with its long-standing track record of delivering 13.77% compounded annually over the last 10 years, towers over the category average of 10.17% annually over the same period. Over a three- and five-year period horizon, the fund returned an annualised 19.58% and 17.12%, respectively as against the category average returns of 15.52% and 14.68%, respectively, over the same period. The fund earned a return of 12.97% in the past one year as against the category average of 8.56%. HDFC Prudence Fund has a diversified quality portfolio with a blend of growth and value and maintains over 70% (74.63% at present) equity allocation before rebalancing. The allocation to a single stock has been capped at around 7%, with the highest currently allocated to State Bank of India. There are 93 stocks in the portfolio and the top three sectors are finance, energy, and technology, which constitute 37.10% of the portfolio. The portfolio turnover is 71% and it has an expense ratio of 2.27%. The fund is benchmarked against CRISIL Balanced Fund Aggressive. The fund is managed by Prashant Jain, an outstanding manager, who is at the helm in one of the best AMCs, which follows a robust process.

ICICI Prudential Balanced Fund Gem

ICICI Prudential Balanced Fund has earned a return of 16.87% over the past one year as against the category average of 8.56%. The three-year and five-year returns are also more than the category average of 15.52% and 14.68%, respectively at 19.9% and 19.42%, respectively. The fund has 71.24% of its portfolio invested in equity comprising 49 stocks. This Rs 5098 crore fund has 35.92% of the portfolio in the top three sectors, finance, energy, and technology. The fund predominantly parks its money in large-caps. But the fund also times its mid-cap investments well, to boost its returns. The expense ratio of the fund is 2.32% while the portfolio turnover ratio is 282%. The fund is benchmarked against CRISIL Balanced Fund Aggressive. Sankaran Naren, the veteran fund manager, manages this fund along with Manish Banthia and Yogesh Bhatt.

Tata Balanced Fund   Gem

The tightrope walk between safety and returns that a balanced fund has to perform is not straightforward, but Tata Balanced has consistently done this better than most of its peers. This fund has handsomely outperformed the benchmark as well as the category over the last ten years. Ten year returns have been 13.6%. This compares very well with the category average of 10.17%. The one-year return of this Rs 6414 crore fund is 5.9% as against the category average of 8.56%. Returns of 18.99% and 18.31% respectively, as against the category average of 15.52% and 14.68% during a three- and five-year period, reflects the fund's ability in stock selection. The fund has not only delivered higher returns during market rallies but also capped losses well during market downturns. During the bear markets of 2011 and 2015, for instance, the fund proved its mettle by outperforming its peers. In the bull phases too (2012 to 2014), it outpaced its peers by a margin of five percentage points. A relatively higher exposure to mid-cap stocks in its equity portfolio, spicing up returns, has helped the fund top the charts. The fund has maintained a well-balanced portfolio comprising equity and debt with a mix of 73:27 respectively (on an average over the last three years). On the equity side, the fund favours a growth-oriented strategy, following a bottom-up approach while cherry-picking stocks with good earnings growth and strong balance sheets. This has aided its steady performance over the long term. However, this strategy did not play out well in the recent rally, which was led by stocks in sectors such as banks, commodities, etc. The fund held a relatively lower share in these stocks compared to its peers. This led to the fund underperforming its peers during the short-lived rally of 2016. However, the long-term track record has been commendable, with the fund outperforming its category in nine out of 10 years. Finance, construction, and energy are the top three sectors. In terms of portfolio construction, equity comprises 72.09% of the portfolio mix, while fixed income securities comprise the rest. The fund has 74 stocks in the portfolio. The fund is benchmarked against CRISIL Balanced Fund Aggressive. The portfolio turnover ratio of the fund is 237% and the expense ratio is 2.3%. The fund is managed by Akhil Mittal and Pradeep Gokhale.

Reliance Regular Savings Equity Fund   Gem

Reliance Regular Savings Equity Fund is an equity-oriented balanced fund with 68.5% in equity. The one-year return of this Rs 3849 crore fund is 6.75% as against the category average of 8.56%. Returns of 18.11% and 17.49% respectively, as against the category average of 15.52% and 14.68% during a three- and five-year period, reflects the fund's ability in stock selection. 42.98% of the portfolio is in the top three sectors, finance, automobile, and technology. The fund has a very compact portfolio of 53 stocks. The fund is benchmarked against CRISIL Balanced Fund Aggressive. The portfolio turnover ratio of the fund is 156% and the expense ratio is 2.03%. The fund is managed by Mr. Amit Tripathi and Mr Sanjay Parekh.

Canara Robeco Balanced Fund Gem

Canara Robeco Balanced Fund is the oldest balanced fund that has exhibited smooth sailing across market cycles. The one-year return of the fund is 5.92% as against the category average of 8.56%. The fund’s three-year and five-year returns of 17.84% and 16.24% respectively are higher than the category average of 15.52% and 14.68% respectively. Canara Robeco Balanced Fund puts in around 67.73% of its portfolio into equities, with 61 stocks in the portfolio. 33.19% of the portfolio is in the top three sectors, concentrated in finance, automobile, and energy sectors. The good performance of Canara Robeco Balanced Fund across market cycles is attributable to its bias towards safety and stability. This is reflected in the significant proportion of large-cap stocks in its portfolio. The fund is benchmarked against CRISIL Balanced Fund Aggressive. The expense ratio of this Rs 768 crore fund is 2.57% with a portfolio turnover ratio of 319%. The fund is managed by Mr. Avnish Jain, Mr. Ravi Gopalakrishnan, and Mr Shridatta Bhandwaldar.