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Investors can buy the units of Reliance Regular Savings Balanced Fund (Reliance Balanced) in the light of its solid returns track record.
The fund is an equity-oriented balanced scheme and has managed to beat its benchmark – Crisil Balanced — over one-, three- and five-year timeframes. The level of outperformance has been to the tune of 5-8 percentage points.
Over the last five years, the fund has delivered compounded annual returns of 12.1 per cent, placing it among the top few funds in its category. It has outpaced peers such as HDFC Prudence, Birla Sun Life 95 and Canara Robeco Balanced.
Reliance Balanced takes significant exposure to mid-cap stocks (less than Rs 7,500 crore market capitalisation) to prop up returns, but tempers the increased risks in equity by taking careful bets on its debt holding as well as by holding ‘safe’ large-caps.
Barring 2011, when it had a rough run, the fund has generally managed to contain downsides and also participate in rallies.The fund is suitable for investors with moderate risk appetite and can be a reasonable diversifier to the portfolio.
Portfolio and strategy
Reliance Balanced takes exposure to mid-cap stocks in the 15-30 per cent range. By taking the right calls on such stocks, the fund has managed to gain during market rallies.
The churning of stocks is fairly heavy, with as many as 19 stocks being exited over the past one year and 14 entered into.
Banks, pharma and software have always been the top sectors held by the fund, with the pecking order generally based on a combination of market momentum and valuations of stocks. This has served the fund reasonably well in delivering superior returns.
One interesting addition to its top holding is the media segment. The logic may be that stocks such as Dish TV and Hathway Cable that figure in its portfolio are expected to benefit from the telecom regulator’s ruling on digitisation.
Reliance Balanced’s debt portfolio holds instruments from established institutions with high credit rating. The fund has invested in the NCDs (non-convertible debentures) of institutions such as HDFC, LIC Housing Finance and PFC; all of the instruments have the highest AAA rating.
Exposure is also taken to AA+ NCDs of Citifinancial Consumer Finance and AA- NCDs of SREI Equipment, which could enhance yields.
The fund also holds cash and equivalents to the tune of around 5 per cent of the portfolio. The NAV per unit of the growth option is Rs 22.6.
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