Portfolio

HDFC Multiple Yield: Invest

M. V. S. Santosh Kumar | Updated on November 12, 2011

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Investors can consider fresh exposure through systematic investment route in HDFC Multiple Yield Fund (Multiple Yield), a debt-oriented balanced fund. The fund can invest as much as 25 per cent of its portfolio in equity. While it has a steady long-term record, it also emerged as the top-performing fund over the last nine months — when interest rates climbed faster — returning an attractive 9.4 per cent (absolute) as against category average return of 4.8 per cent. This suggests that it managed the rising interest rate environment well, gaining from attractive returns in short-term debt instruments.

The fund clocked returns of 12.8 per cent and 9.5 per cent over three- and five-year periods. The returns are impressive compared with Crisil Debt Hybrid (75:25) index which gained 10.8 per cent and 7.7 per cent annually over similar periods.

Crisil Hybrid index is a better benchmark for HDFC's debt-oriented balanced funds as they can invest as much as 25 per cent in equities as against 15 per cent weight given to equity in Crisil MIP blended index.

Suitability: The fund is suitable for investors who can assume slightly higher risk, to get returns better than pure debt instruments, over the long term. The fund has been catching up with some of the top performing funds in the balanced fund category.

Even as Multiple Yield Fund managed to contain the downside better than some of its peers, it still lost money during the 2008-09 market lows. Investors may witness short-term blips in the fund during volatile markets. Taking the systematic investment route would allow investors to manage volatility better.

Performance and portfolio: As of October, the fund held 17 per cent of its assets in equity and 78 per cent in debt.

Equity investments, although in mid- and small-cap stocks, had low beta thus providing cushion in a down market.The equity portfolio is well diversified with investments in 26 stocks.

The debt portfolio is dominated by short-term certificate of deposits. The short-term instrument rates for top-rated instruments continue to be high (9.0-10.1 per cent depending on the maturity). Even as the RBI has paused interest rate hikes for the time-being, the recent hike in petrol prices and support prices for crops may further fuel inflation. This would mean that the rates may continue to stay at elevated levels auguring well with the fund's strategy of investing in short-term instruments. The fund has maintained a debt portfolio maturity of less than one year for several years now.

While the fund's returns slipped into negative territory during the 2009 market correction, during the recent correction the fund managed to stay in the positive territory even as bellwether index Nifty lost 16.8 per cent in a year.

Published on November 12, 2011

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