Investors looking to save for any long-term goal could buy 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 consistently managed to deliver returns ahead of its benchmark — Crisil Balanced — over one-, three- and five-year time frames. Its level of outperformance has been quite healthy, to the tune of 7-11 percentage points.

Over the past five years, the fund has delivered compounded annual returns of 24.3 per cent, making it the top fund in its category.

By taking a judicious blend of large-cap stocks and a fairly high proportion of mid-caps to pep up returns, the fund has been able to deliver consistently across market cycles.

The fund’s investment pattern pushes up its risk profile. However, its fairly high level of debt, combined with the reasonably resilient large-caps holdings, somewhat tempers the risk profile

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 if you are investing for your child, until the child turns 18, whichever is later. Without the lock-in, withdrawals for the first three years would attract an exit load of 1 to 3 per cent.

Investors can make the fund a core part of their portfolio and park amounts by taking the systematic investment plan (SIP) route.

Portfolio and Strategy

The HDFC Children’s Gift Fund takes substantial exposure to mid-cap stocks (less than Rs 7,500-crore market capitalisation). This has been to the tune of about 30 per cent to 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 27-30 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 has increased its exposure to banks and reduced its weightage to consumer non-durables as valuations in the segment turn expensive. It has also reduced exposure in the pharma space to select quality stocks.

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 (debentures, NCDs and sovereign loans) with AAA ratings. Investments have been made in companies such as Tata Motors, HDFC, LIC Housing Finance, IRFC and PFC.

Overall, the fund is a sound bet for saving towards a long-term goal with a blend of reasonable safety and above-average returns.