The Hindu Business Line : ICICI Pru Balanced Fund: Sell

Investors can consider selling their holdings in ICICI Pru Balanced Fund (ICICI Balanced) considering that its performance has lagged its benchmark as well as peers consistently. The fund trailed its benchmark Crisil Balanced Fund Index over one- and three-year timeframes. ICICI Balanced has delivered a compounded annual return of 17 per cent on a five-year basis, placing it in the lower half of balanced funds, while marginally outperforming its index.

The fund has a 10 year track-record. But funds that are just as old have delivered superior returns over the long term. Investors may consider switching over to funds such as DSPBR Balanced and Birla Sun Life ’95 for steady and consistent returns, while an aggressive addition would be HDFC Prudence.

All these funds outpaced ICICI Balanced comfortably by 5-10 percentage points, over the long term; this gulf has only widened in the last year.

Performance and strategy: In the market upswing of 2007 and in the current market run-up from March 2009, the fund underperformed the Crisil Balanced Fund Index. ICICI Balanced did better its benchmark in the June 2006-February 2007 rally.

In the market corrections of May-June 2006, early 2007 and in the protracted downslide of 2008-09, the fund underperformed its benchmark as well as peers.

ICICI Balanced had, in the earlier boom periods invested over 80 per cent of its portfolio in equity, much higher than its peers did, and this may have resulted in heavier falls during corrections. The upside may have been capped by the fact that the equity portfolio has a large-cap focus, and earlier rallies were led by mid-caps.

But in the last year or so, during volatile markets, ICICI Balanced has, at times reduced the equity portfolio to less than 50 per cent. Despite this, the fund has not been able to stem the fall in its NAV.

The fund’s debt portfolio has always taken the safer route in investments. These comprise mainly deposits in banks and other public sector utilities or financial institutions. The bonds have been mostly AAA rated. The proportion of debt held in the portfolio is 25-40 per cent. Cash held has been miniscule, accounting for less than two per cent, while derivatives, as a proportion of total portfolio, have been 2-10 per cent.

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