Mutual Funds

Canara Robeco Balance - INVEST

Parvatha Vardhini C. | Updated on March 12, 2018


The fund’s picks work well to provide downside protection in falling markets.

You like the adrenaline rush that the equity market offers but at the same time want to restrict your losses. Canara Robeco Balance Fund, which has had a good track record in the last five years, could be the answer.

The fund, which generally allocates 25-35 per cent of its holdings to debt instruments, has delivered a compounded annual return of 17.7 per cent in the last five years. This equals returns posted by seasoned diversified equity funds, such as HDFC Top 200, ICICI Pru Top 200 and Birla Sun Life Top 100.

Performance and suitability

The fund’s picks work well to provide downside protection in falling markets, making it suitable for investors with a limited ability to take on risks. Both in the 2008 and 2011 market fall, for example, the fund’s NAV dropped only by about 39 per cent and 10 per cent, respectively, bettering the category average (i.e. equity-oriented balanced funds) as well as the market bellwethers by a huge margin.

A major reason for the fund’s knack of containing losses is its focus on large-cap stock picks (stocks with market capitalisation of Rs 7,500 crore and above). About 70 per cent of its total equity holdings are in large-cap stocks across market cycles. At the same time, the focus on large-caps is also the reason for the fund not being able to take off in rallies like other peers such as Magnum Balanced, Tata Balanced and Birla Sun Life 95. These funds tend to have a bigger exposure to mid-cap stocks. Hence, investors willing to take on more risks for higher returns are better off going with these funds. That the fund serves low risk appetite well is also reiterated by its picks for the debt portion of its portfolio. It predominantly chooses corporate debt instruments with AAA or AA+ rating, besides CBLOs, certificate of deposits and commercial papers.

Over longer timeframes, of three and five years, Canara Robeco Balance has fared better than its category average and both the Nifty and the CNX 500 indices. The outperformance over the category average is to the extent of 1.5-3 percentage points.

Portfolio strategy

The fund actively manages its exposure to corporate bonds from institutions such as HDFC, ICICI Bank, LIC Housing Finance and PFC.

In its equity portion, since January this year, the fund has done well to reduce its exposure to the beaten down banking sector, from about 20 per cent to 9 per cent currently.

But its limited holdings in performing sectors such as pharma and software have hurt its performance in the last one year. Its one-year return of 3.8 per cent lagged the category average of 5.2 per cent. The fund has made amends, though, pegging up software exposure to about 14 per cent since July from 8 per cent earlier.

Published on October 26, 2013

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