In volatile markets such as the one we are seeing now, and when there is economic as well as political uncertainty, it is prudent to allocate a portion of investments to balanced schemes.

Investors can consider buying units of HDFC Balanced in the light of its steady and reliable track record over the long term.

Over one-, three- and five-year timeframes, the scheme has managed to beat its benchmark — Crisil Balanced — and the category average returns.

The out-performance has been to the tune of 2-6 percentage points across market cycles.

In the last five years, HDFC Balanced has delivered compounded annual returns of 23.1 per cent, which places it among the top few funds in its category, ahead of peers Tata Balanced and ICICI Pru Balanced. Over the last three years, it has done better than HDFC Prudence, which has been hit by concentrated sector and stock choices.

This equity-oriented hybrid scheme takes a more cautious approach with respect to allocation to debt, with a higher proportion parked in such instruments, compared with other balanced funds.

In terms of allocation to individual stocks too, a very non-concentrated exposure is maintained which makes the fund suitable for investors with a low to moderate risk appetite. Given its performance record of over 10 years, HDFC Balanced could be a suitable addition to the core portion of any investor’s portfolio.

Portfolio and strategy Investors with a five-seven year horizon can take the SIP (systematic investment plan) route to buying units of the fund.

HDFC Balanced keeps the debt portion of its portfolio at a higher proportion compared with peers. Generally, 30-35 per cent is allocated to debt and cash, as against 25-30 per cent maintained by many equity-oriented balanced funds. This makes downside containment possible across market cycles.

The fund’s allocation to individual stocks is less than 5 per cent and is even lower than 4 per cent at times. This makes its exposures less concentrated. It also lowers risk despite the scheme taking exposure to mid-cap stocks up to 30 per cent, especially when they are undervalued and offer an attractive investment option.

Banks have always been the top sector for the fund. But in the last one year, software has gained prominence in the portfolio, given the segment’s sound business prospects and reasonable valuations. Pharma is another key sector. Industrial products and consumer non-durables too figure in the portfolio, though with lower weightage.

The debt portion of HDFC Balanced is mostly invested in high-quality companies and financial institutions, though not necessarily highly rated.

Tata Motors, HDFC, Shriram Transport, LIC Housing Finance and Power Finance Corporation are some institutions in whose non-convertible debentures the fund has invested. There is also significant exposure to Government securities. Infosys, TCS, Mindtree, LIC Housing Finance, IPCA Labs and Aurobindo Pharma are some of the top stock holdings of the fund currently.

Fundas

■ Five-year return of 23 per cent

■ Ahead of the category

■ High debt boosts return

Related Topics
comment COMMENT NOW