The Hindu Business Line : HDFC Prudence: Invest

For conservative investors looking for equity exposures with a lower level of downside risks, balanced funds such as HDFC Prudence Fund appear a good option. Investors can add this fund to their core portfolio. Balanced funds in general, provide a mix of equity and debt exposures along with a hassle-free way to re-balance your portfolio. The fund does the job of periodic profit booking on the equity portion, to maintain a steady balance between debt and equity in the portfolio.

Despite being a balanced fund, HDFC Prudence has an outstanding track record, matching the category-average returns for diversified equity funds over a five-year period. The fund’s equity portion is focused on mid-cap stocks, which also augurs well for its return potential, given that mid-cap stocks appear attractively valued compared to their large-cap peers at present. Further, any volatility arising from mid-caps may be cushioned by debt and money market instruments, which at present make up about 25 per cent of the total assets.

A commendable job of actively managing its debt portfolio by taking advantage of higher interest rates on corporate debt may have helped the fund outperform a number of equity funds over the past year. This also appears to have provided downside protection, in a scenario otherwise dominated by market volatility. The fund’s one-year return of 40 per cent has far outpaced its benchmark’s (Crisil Balanced Index) return of 25 per cent. Interestingly, the fund’s one-year return is not too far behind the average returns of mid-cap funds which stood at 46 per cent over the above period. HDFC Prudence has remained the top fund in the balanced category on a five-year basis.

Over the past six months, the fund gradually reduced exposure to consumer goods and software stocks and instead propped up its holdings in capital goods and construction stocks. Given that a good number of stocks in the engineering segment have outperformed the market, the fund’s present portfolio appears promising. Capital goods, auto ancillaries and media are the top three sectors in the portfolio. Exposure to equity has been in the 75 per cent range in 2007. Assets under management stood at Rs 2,522 crore. The fund’s growth option has an NAV of Rs 125.7 per unit.

Vidya Bala

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