The Hindu Business Line : HDFC Prudence: Invest

Investors can buy the units of HDFC Prudence, a balanced equity-oriented fund, considering its long-term track record in delivering returns and ability to contain downside as a result of hedge offered by its debt exposure. The fund’s balanced structure may, however, limit it from benefiting as much as top diversified equity funds during market rallies. It may, therefore, be suitable for investors with a low-risk appetite.

Over a five-year period, HDFC Prudence is one of the best performing balanced funds with a return of 26.8 per cent compounded annually. This compares favourably with a good number of diversified equity funds. With a mandate that allows it to move to debt substantially, the fund may be well placed to not only contain downside risks from equity but also benefit from rallying interest rates.

Performance: HDFC Prudence has managed to beat its benchmark — the Crisil Balanced Fund index — over a three and five-year period. While it has trailed its benchmark over the last year it has, nevertheless, managed to contain losses better than indices such as the Sensex and the Nifty. The fund has, over a long-term period, delivered returns superior to peers such as FT India Balanced and DSPML Balanced fund.

During market rallies, the fund may not be able to fully participate to deliver superlative returns, given its debt exposure. It may at best deliver steady returns. The fund has so far retained its bias for equity (about 75 per cent of assets at present) and kept its debt holding limited when compared to other balanced funds. But importantly, during phases of market fall the current year, the fund has contained losses better than its benchmark.

Strategy: HDFC Prudence has around 40 per cent of its portfolio in midcaps (with less than Rs 7,500 crore market cap) stocks and has retained this proportion for over a year. This strategy worked well for the fund during last year’s market rally. The fund also invested in momentum sectors such as capital goods, banks and power. It does not indulge in heavy churning in sectors. But exposure to defensive sectors such as pharmaceuticals and consumer non-durables has seen an increase.

More Stories on : Mutual Funds | Mutual Funds | Recommendation

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Indian investors need not rush for cover

Cummins India: Hold

HDFC Prudence: Invest

Reliance Diversified Power Fund: Invest

Mahindra and Mahindra: Buy

Index Outlook