GEMGAZE

January 2018 

Proper asset allocation and regular rebalancing are two of the most important requirements in investing. Balanced funds provide an avenue to achieve both. Balanced funds are suitable for investors who want to enjoy the returns from equity investments but with a safety cushion. Normally this is true for first time investors or investors who have low to moderate risk appetite. Since balanced funds are a mix of equity anddebt, they have lower volatility than the equity funds and their returns are higher than the debt funds. Though in a bull market these funds will not give you as much return as pure equity funds, the loss would be lower than those funds in a downward moving market.

All the GEMs from the 2017 GEMGAZE have performed reasonably well through thick and thin and figure prominently in the 2018 GEMGAZE too.

HDFC Prudence Fund Gem

HDFC Prudence Fund is the largest fund in the category with assets amounting to Rs 36,395 crore. The fund, managed by Prashant Jain, widely regarded as one of the most competent money managers, has delivered an annualised return of 19.47% since its inception. HDFC Prudence, with its long-standing stellar track record of delivering 12.23% compounded annually over the last 10 years, towers over the category average of 8.79% annually over the same period. Over a three- and five-year period horizon, the fund returned an annualised 16.53% and 11.90%, respectively as against the category average returns of 16.13% and 11.42%, respectively, over the same period. The fund earned a return of 26.01% in the past one year as against the category average of 22.77%. HDFC Prudence Fund has a diversified quality portfolio with a blend of growth and value. The allocation to a single stock has been capped at around 7%, with the highest currently allocated to State Bank of India. There are 91 stocks in the portfolio and the top three sectors are finance, energy, and construction, which constitute 43.78% of the portfolio. The portfolio turnover is 61% and it has an expense ratio of 2.26%. The fund is benchmarked against CRISIL Balanced Fund Aggressive.

ICICI Prudential Balanced Fund Gem

Launched in 1999, ICICI Prudential Balanced Fund is a very popular product in this category and is the best performing balanced fund in thelast 5 years. ICICI Prudential Balanced Fund has earned a return of 23.39% over the past one year as against the category average of 22.77%. The three-year and five-year returns are also more than the category average of 11.42% and 16.13%, respectively at 13.21% and 18.25%, respectively. The fund has 71.24% of its portfolio invested in equity comprising 77 stocks. This Rs 23,954 crore fund has 38.99% of the portfolio in the top three sectors, finance, energy, and auto. The fund has traditionally featured a high equity allocation, hovering at well over 70%, which is higher than the allocations of the peers. But in the last one year, the allocation has been moderated from 78-79% levels to 66-67% of the portfolio. The fund appears to practise some degree of tactical allocation based on market valuations. Within equities, well over two-thirds of the allocation is parked in large-cap stocks, which is higher than the peers’ allocations. In terms of style, the fund follows a blend of growth and value styles. For the debt portion, the fund relies more on duration than credit calls to improve returns.  The expense ratio of the fund is 2.20% while the portfolio turnover ratio is 171%. The fund is benchmarked against CRISIL Balanced Fund Aggressive. Sankaran Naren, the veteran fund manager, manages this fund along with Manish Banthia and Atul Patel.

Tata Balanced Fund   Gem

This consistent fund has managed an impressive performance amid the swinging markets of the last seven years. It has been among the top ten funds in the balanced category in eight of the last ten years. This fund has handsomely outperformed the benchmark as well as the category over the last ten years. Ten year returns have been 10.38%. This compares very well with the category average of 8.79%. The one-year return of this Rs 5,875 crore fund is 18.72% as against the category average of 22.7%. Returns of 9.98% and 16.20% respectively, as against the category average of 11.42% and 16.13% during a three- and five-year period, reflects the fund’s ability in stock selection. The fund has maintained a well-balanced portfolio comprising equity and debtwith a mix of 73:27 respectively (on an average over the last three years). Finance, construction, and energy are the top three sectors. In terms of portfolio construction, the top three sectors comprise 40.08% of the portfolio mix. The fund has 56 stocks in the portfolio. The fund is benchmarked against CRISIL Balanced Fund Aggressive. The portfolio turnover ratio of the fund is 258% and the expense ratio is 2.11%. The fund is managed by Pradeep Gokhale and Murthy Nagarajan.

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 10,498 crore fund is 28.62% as against the category average of 22.77%. Returns of 13.45% and 16.51% respectively, as against the category average of 11.42% and 16.13% during a three- and five-year period, reflects the fund’s ability in stock selection. 48.21% of the portfolio is in the top three sectors, finance, construction and automobile. The fund has a verycompact portfolio of 63 stocks. The fund is benchmarked against CRISIL Balanced Fund Aggressive. The portfolio turnover ratio of the fund is 306% and the expense ratio is 1.98%. 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 22.88% as against the category average of 22.77%. The fund’s three-year and five-year returns of 10.69% and 15.51% respectively are higher than the category average of 11.42% and 16.13% respectively. Canara Robeco Balanced Fund has 56 stocks in the portfolio. 38.46% of the portfolio is in the top three sectors,concentrated in finance, construction, and energy sectors. The good performance of Canara Robeco Balanced Fund across market cycles isattributable 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 1,494 crore fund is 2.45% with a portfolio turnover ratio of 256%. The fund is managed by Mr. Avnish Jain, Mr. Ravi Gopalakrishnan, and Mr Shridatta Bhandwaldar.

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