Fund Call. ICICI Prudential Balanced: Skillful juggling act

With the Sensex running up sharply in the last six months, investors can play it safe with ICICI Prudential Balanced. With about 30 per cent exposure to safer debt instruments, it provides the right cushioning for risk-averse investors at this juncture.

The fund has delivered top-notch returns in the last one year at 14.9 per cent as against an average return of 10.1 per cent for the category. It has also managed to beat the category returns across time horizons — one, three and five years. The year 2015, though, was a bad patch, when it temporarily slipped in relative performance. However, over the longer five- and seven-year periods, the fund ranks among the top three in its category.

The fund aims to keep its equity allocation in the range of 65-80 per cent most of the time.

In the last one year, equity holdings, on an average, were 72.2 per cent of its portfolio — varying between 69 and 77 per cent. The fund predominantly invests in large-caps while also taking some mid-cap exposure to boost overall fund returns.

Bajaj Finserv (delivering 78 per cent return ) and HDFC Bank (19 per cent) were among the largest contributors to its overall returns in the last one year.

In contrast, IT stocks were a drag, with Tech Mahindra (down 25 per cent) and Wipro (down 20 per cent) pulling down its overall performance.

During the year, the fund took fresh exposure to Bharti Airtel, Coal India and Tata Chemicals while exiting the counters of Maruti Suzuki, IndusInd Bank and ITC.

The fund is relatively overweight on energy, healthcare and tech compared to its peers, while remaining underweight on financials and FMCG. Bharti Airtel (5 per cent), HDFC Bank (4.4 per cent) and Coal India (4.2 per cent) are its top three stocks, while energy, financials and healthcare remain its top sectors, in that order.

As of September 30, the fund had 43.4 per cent of its debt portfolio in G-Secs. ‘A’ rated instruments comprised 1.4 per cent of debt portfolio, while ‘AA’ and ‘AAA’ rated debt comprised 24.6 per cent and 6.9 per cent, respectively.

Last year, the fund manager took higher interest rate risk on the debt portfolio than the credit risk. The fund currently has an average maturity of 6.4 years.

This is, however, nearly half its maturity levels a year back — from about 12 years. This helped the fund rake in returns in the last one year when rates on benchmark 10-year G-Secs fell 70-80 basis points.

Over the last one year, the fund’s exposure to G-Secs has been cut in favour of non-convertible debentures.

Among corporate papers, Hindalco Industries (2.8 per cent), Nirchem Cement (2.4 per cent) and State bank of India (1.4 per cent) are amongst its top holdings.