Mutual Funds

HDFC Children's Gift Fund – Investment Plan: Invest

K. Venkatasubramanian | Updated on March 26, 2011

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Investors can buy the units of HDFC Children's Gift Fund – Investment Plan (HDFC Gift), given its track record in delivering steady returns over the long-term. HDFC Gift has managed to beat the returns of its benchmark, Crisil Balanced Fund Index, over one-, three- and five-year timeframes.

Investments in this equity-oriented balanced fund can be done on behalf of a minor. The fund has a lock-in period of three years or until the child's age of 18, whichever is later.

Over the last three years, the fund has had a strong wicket and its return over this period places it among the top few in the ‘balanced' category. Its outperformance in the rally from March 2009 has especially been spectacular with HDFC Gift delivering as much as 30 percentage points more than its benchmark. The fund, while participating in the market upswing from March 2009, has also been able to stem the fall in its NAV better than Crisil Balanced during the market correction over the past three months. While it did participate in the rally of 2006-07, it lagged behind in 2007 and also fell more than its benchmark during the correction of 2008-09.

The fund may thus be suitable for investors with a greater penchant for risk. Investors can choose to take the SIP (systematic investment plan) route to ride out the volatility if they have a very long-term horizon of 8-10 years or more. HDFC Gift may be used as a diversifier to the portfolio.

Portfolio and strategy: The fund takes substantial exposure, to the tune of 25-30 per cent of the portfolio, to mid-cap stocks (less than Rs 7,500 crore market capitalisation) that are inherently given to volatile price movements.

Although this increases the risk-profile of the fund, HDFC Gift tempers it by increasing its investments in debt instruments and cash substantially during market downswings. This has been in the range of 25-30 per cent, across different market phases. Further, in terms of weights given to stocks, the fund has always adopted a conservative approach with individual stocks always accounting for less than 5 per cent.

HDFC Gift adopts a fairly stable approach to the sectors that it invests in, with banks, consumer non-durables and pharmaceuticals being the top ones to figure in the portfolio over the past few years. These sectors had a spectacular run from the 2009 lows, allowing the fund to gain substantially. Stocks too are not churned at rapid frequency, with only nine stocks going out of the portfolio in the last three years. The choice of stocks such as TTK Prestige, VST Industries and Motherson Sumi among the top 10 suggests an unorthodox approach.

The fund's debt portfolio represents a mixed bag of instruments. Apart from certificates of deposits of public sector banks, the fund also takes exposure to corporate debts to perk up yields.

Corporate debt offerings of companies such as Britannia Industries, ICICI Bank, Tata Motors, Jet Airways, Shriram Transport Finance figure in the portfolio, among others. The ratings of these instruments vary from AA to AAA.

Published on March 26, 2011

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