The Hindu Business Line : DSP ML Balanced Fund: Invest

With a flexicap approach to stock selection, this fund appears well-suited to be a core portfolio holding for an investor who does not wish to take active calls on asset allocation.

Returns on balanced funds as an asset class have improved in recent times with higher returns from debt instruments and price appreciation in select large- and mid-cap stocks. DSP ML Balanced Fund is among the balanced funds, which have managed to take good advantage of these investment conditions to deliver healthy investment returns to investors. The fund's one-year returns of 31 per cent are superior to several pure equity funds and beat the CRISIL Balanced Fund benchmark by about 6 percentage points. Over a five-year period, the fund has delivered an annualised return of about 35 per cent. Having beaten the category average as well as the CRISIL Balanced Fund index over 1-, 3- and 5-year time-frames, the fund appears a good option for investors looking for an equity exposure in combination with a debt portfolio.

Suitability: With a fairly actively managed debt portfolio and a flexicap approach to stock selection, this fund appears well suited to be a core portfolio holding for an investor who does not wish to take active calls on asset allocation or stocks with a differing market-cap focus.

However, with most balanced funds opting for an aggressive equity exposure, investors who are really averse to downside risks may not find them a suitable option, as they may be vulnerable to a sharp correction in stock prices.

Portfolio: Several balanced funds have opted for a higher equity exposure over the past year, to avail of the dividend tax exemption granted to equity-oriented funds. And so did this fund. Allocation to equities has been consistently high, at 65 per cent or more for the past year.

Though equity exposures climbed to over 70 per cent by end of 2006, the fund has moderated its equity exposures in recent times, with 67 per cent of the portfolio invested in equities in the April 2007 portfolio. The fund's sector choices, which have leaned towards frontline software, petroleum, media and power, have probably helped its performance in recent times.

In terms of stock selection, the portfolio has featured a good mix of mid-cap and large-cap stocks. GSPL, TCS, Reliance Industries and NIIT were some of the top equity picks in the portfolio as of April 2007. This flexicap approach has probably helped the fund benefit from the recent bout of re-rating in mid-cap stocks.

The fund appears to have taken good advantage of the firm trend in interest rates by taking exposures to floating rate bonds issued by banks and financial institutions. Bulk of the debt exposures (25-28 per cent of assets) in recent months have been to floating rate instruments.

Fund facts: Launched in May 1999, DSP ML Balanced Fund has a mandate to invest 65-75 per cent of its portfolio in equities and related assets and 25-35 per cent in debt and money market instruments. It charges an entry load of 1 per cent on fresh lumpsum as well as SIP investments.

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