The Hindu Business Line : DSPML Balanced Fund: Invest

Investors with a conservative risk profile may find balanced funds, which invest in a mix of debt and equity, a suitable investment option at this juncture. These offer investors the opportunity to earn equity-linked returns, while reducing downside through their exposure to debt instruments.

The debt portion in balanced funds hasn’t delivered healthy returns in recent years on account of the tightening bias to interest rates. But with domestic interest rates expected to peak out over the next six months, the debt portfolios of balanced funds may also begin to offer scope for more active management, thus improving their return potential.

Of the various balanced funds on offer, DSPML Balanced Fund appears to be a good investment option by virtue of its good long-term track record.

This fund has delivered a compounded annual return of about 37 per cent over a five-year period, against a 26 per cent return in the balanced benchmark — the CRISIL Balanced Fund Index. Recent performance has also been quite good, with the fund consistently figuring among the top five in its category over three- and one-year periods.

Suitability: Balanced funds in the Indian context have tended to be aggressively managed, with a relatively high equity exposure (60 per cent plus).

DSPML Balanced Fund too has featured quite a high equity exposure in the past. Allocation to equity has ranged between 70 per cent and 73 per cent of assets in 2007. But this has of late been tempered to a 63 per cent allocation by end March.

This, combined with better performance from the debt portfolio, should lend the fund greater resilience to stock market downside in the coming months.

Performance: DSPML Balanced Fund’s track record over the past five years compares favourably even to many diversified equity funds. The five-year returns stand at 37 per cent (annualised), 3-year returns at 33 per cent and one year returns at about 28 per cent.

In the corrective phase since January, DSPML Balanced Fund’s NAV has lost about 14 per cent in value. This is in line with the category average and only 3 percentage points behind the Nifty’s loss of 17 per cent for this period. However, the fund has contained erosion far better than diversified equity funds and its long track record and seasoned management are confidence-inducing factors.

In the equity portfolio, the top holdings have shown a preference for large-cap stocks such as L&T, Reliance, ONGC and Infosys, though mid-cap picks such as UTV Software and Gujarat Alkalis also feature down the line.

The equity portfolio appears actively churned, with Reliance Communications, Tata Steel and GSK Consumer being some of the recent adds. The debt portfolio has been fairly concentrated in two or three securities, with floating rate bonds from HDFC, IDBI and LIC Housing being the key holdings.

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