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Investors with a low appetite for risk and looking for stability amidst see-sawing markets can buy units of ICICI Pru Balanced fund to gain reasonable returns over the long-term of 5-7 years.
The scheme has improved its performance significantly over the past four years. It has delivered 4-5 percentage points higher than its benchmark – Crisil Balanced Fund Index, over one-, three- and five-year timeframes.
Its return of 7 per cent over the past three years places it among the top few funds in the equity-oriented balanced funds category.
ICICI Pru Balanced has delivered more than its peers such as Franklin India Balanced, HDFC Balanced and Birla Sun Life ‘95 have over this period.
The fund has generally kept its equity exposure to about 66-72 per cent of its portfolio, as against 75 per cent levels that many equity-oriented balanced maintain.
This higher preference for debt, together with a diffused allocation to stocks and sectors lowers the risk-profile of the scheme. That its equity holdings are mainly in large-cap stocks, adds to the fund’s stability.
ICICI Pru Balanced manages debt portion quite actively to ensure higher yields from its holdings. Investors with a low-risk appetite can consider exposure to the fund through the SIP(systematic investment plan) route to ride out market volatility.
Portfolio and strategy
ICICI Pru Balanced has reduced its exposure to mid-cap stocks(less than Rs 7500 crore market capitalization) over the past one year from 20-25 per cent levels to about 15 per cent currently. The thrust on large-caps has helped its performance well in volatile markets.
Banks and auto(including ancillaries) have remained the fund’s top sector picks. Despite not going heavy on consumer non-durables, the fund has managed to outperform by riding on other segments such as software and pharma.
Going by its sector moves, there appears to be a certain value orientation to the fund. Exposure to individual stocks generally does not exceed five per cent. Barring a couple of sectors, no segment exceeds 10 per cent of the portfolio. This non-concentrated exposure to sectors and stocks helps, especially in volatile markets, to limit downsides.
The debt portion, which accounts for over 30 per cent of its portfolio indicates safe bets.
Apart from government securities, which account for over half of its debt investments, the scheme takes exposure to debentures and bonds of companies such as Tata Steel, IDBI Bank, Shriram Transport Finance and Reliance Gas Transport Infrastructure.
The ratings of these instruments range from AA+ or AAA, indicating a relatively high degree of safety.
The debt portfolio is quite actively managed with the average maturity profile increasing significantly over the past one year to 8.19 years currently with a robust yield to maturity of 9.77 per cent. Invest in the scheme for over five years to generate above-average returns without taking too much risk.
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