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Investors can buy the units of HDFC Children’s Gift Fund – Investment Plan, an equity-oriented balanced fund that has delivered well over the past several years.
The fund has steadfastly managed to deliver returns ahead of its benchmark – Crisil Balanced, over one-, three- and five-year timeframes. The level of outperformance has been to the tune of 6-10 percentage points.
Over the past three years, the fund has delivered compounded annual returns of 16 per cent, making it the top fund in its category.
By taking a judicious blend of large-cap stocks, together with a fairly high proportion of mid-caps to pep up returns, the fund has been able to deliver consistently across market cycles.
Though this pattern of investment perks up its risk profile, the fairly high debt levels that it maintains, together with reasonably resilient large-caps holdings, help the fund to temper it somewhat.
The fund is suitable for investors with a moderate risk profile, who wish to save for the long term. There are two options — with and without a lock-in period. The first option is with a lock-in period of three years or until the child turns 18, whichever is later. Without the lock-in, withdrawals for the first three years would attract an exit load of 3-1 per cent.
Investors can make the fund a core part of their portfolio and can park amounts by taking the SIP (systematic investment plan) route.
Portfolio and strategy
HDFC Gift takes substantial exposure to mid-cap stocks (less than Rs 7,500 crore market capitalisation). This has been to the tune of a third of its equity portfolio. By taking appropriate stock bets in this space, the fund has been able to stay ahead of its benchmark and most of its peers in the category.
The debt portion has always hovered around 30 per cent of the overall portfolio, which tempers risk levels.
The fund has consistently favoured banks, consumer non-durables and pharma sectors, which have mostly figured among the top few holdings. Over the last one year, the fund increased exposure to banks, while reducing weightage to consumer non durables as valuations in the segment turn expensive.
HDFC Gift retains the companies that it buys into and does not exit them frequently.
In its debt portion, the fund takes a fairly conservative stance in choosing investments. Almost all of its investments are in debt instruments (bonds, NCDs and structured obligations) with the highest AAA ratings. Investments have been made in institutions such as HDFC, IRFC, PFC, LIC Housing Finance and ICICI Bank. Structured obligations investments are made in Tata Motors and Bajaj Auto.
Overall, the fund is a sound bet for generating above-average returns over the long-term of 5-10 years.
The NAV per unit of the growth option is Rs 66.1.
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