HDFC Multiple Yield 2005: Invest

Fresh investments can be considered in the units of HDFC Multiple Yield 2005 Fund, a debt-oriented balanced fund.

The fund invests a maximum of 20 per cent in equity to provide inflation-beating returns. It has consistently outperformed its benchmark CRISIL MIP Blended Index over a three-year period.

It delivered 11.86 per cent and 9.74 per cent compounded return over a three, five-year period, respectively. During the same time periods, its benchmark returned 8.43 per cent and 7.54 per cent.

Suitability : Even while equity markets continue to meander with no particular direction, short term rates in debt are likely to remain firm until the end of policy moves to curb inflation. The fund's exposure to instruments with short term maturity may therefore provide a good opportunity to invest now.

The fund may be considered marginally less risky compared with HDFC MIP or HDFC Multiple Yield which invest up to a fourth of their portfolio in equities. It is therefore suitable for conservative investors.

HDFC Multiple Yield 2005 has also managed to contain downsides better than the above peers.

For instance, during the correction in 2008, on a one-year rolling return basis the fund lost just 2.5 per cent as against a loss of 13 per cent posted by HDFC MIP Long-term.

Investors have to note the fund carries a one per cent load if an exit is done within 15 months of investment.

The returns of debt-oriented balanced funds waned over the last one year due to volatile equity market.

Performance : During this period, HDFC Multiple Yield 2005 managed a one year return of 7.55 per cent placing it amongst the better performing funds. The category average for debt-oriented balanced funds was 5.54 per cent.

The fund's performance was superior to some of the popular chartbusters such as Reliance MIP and HDFC MIP Long Term. The superior performance was on account of low exposure to equity and high proportion of short-term securities in its portfolio.

The fund had for a good part of last year invested not more than 12 per cent in equity (against 20 per cent permissible limit). Even during the market rally in 2009, the proportion of equity was low due to which it under-performed the benchmark for a brief period of time.

On a one-year rolling return basis, it outperformed its benchmark 84 per cent of the time, over the last three years. However, its underperformance relative to its peers with higher equity exposure was visible in equity rallies in 2007 and 2009.

Portfolio : As of June 2011, the equity exposure of the fund was only 6.4 per cent while 92 per cent of the portfolio is invested in debt. Despite a mid-cap focus, the equity pie is well-diversified with 28 stocks . Money market instruments accounted for 79 per cent of the total borrowing.

The strategy of going for instruments with short-term maturity, which it has been adopting for a while now, may have reduced the interest rate risk.

COMMENT NOW