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With overheated stock markets, a measure of debt can help balance out the equity risk. Equity-oriented balanced funds serve this purpose, and among the top in this category is Tata Balanced Fund.
In the one- to five-year time periods, it has bettered the benchmark Crisil Balanced Fund by 8 – 21 percentage points.
Across market cycles as well, Tata Balanced figures in the top quartile of funds in its category.
PerformanceTata Balanced Fund’s 41 per cent return over the past year may be lower than the 50 per cent plus returns of some of its peers, but that’s because the company played it relatively safe. Its exposure to riskier small- and mid-cap stocks is less than a quarter of its equity portfolio.
While the fund does increase holdings in small- and mid-caps when the market is buoyant, the exposure has rarely exceeded 25 per cent of the portfolio.
The fund benefited last year by increasing stakes in cyclical sectors such as banks and engineering, while paring holdings in defensives such as pharma. Its choice of stocks across market capitalisations was good. Smaller stocks such as Sadbhav Engineering and Va Tech Wabag almost tripled over the last year, while large-caps such as Axis Bank and Eicher Motors also gained handsomely. Letting go of losers such as Jaiprakash Associates also helped the fund’s performance. Over the past three- and five-years, multibaggers such as Motherson Sumi and Lupin aided the fund’s returns.
More than a quarter of Tata Balanced’s current portfolio is in debt instruments, the chunk of it in government securities. The rally in G-Secs in recent months would have boosted the fund’s performance. The fund also plays it safe on non-convertible debentures, restricting itself to securities rated AA and above.
Over the past two years, Tata Balanced has remained nearly fully invested; a shift from earlier years when between 10 and 18 per cent of the portfolio was held in cash. Currently, banking stocks, mostly private ones, account for the largest chunk (14 per cent) of the fund’s equity portfolio. If the economy turns around, this should translate into good returns.
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