Mutual Funds

HDFC Balanced: Scores with a consistent track record

Yoganand D | Updated on January 22, 2018

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Active management of debt and equity portfolios makes this fund a winner



For conservative investors, some balanced funds have proved a better bet than pure equity funds in the last five years.

HDFC Balanced Fund is one such scheme. HDFC Balanced fund is an equity-oriented balanced fund with a consistent and dependable long-term track record. The fund has beaten its category average returns across one, three and five-year periods.

Despite its lower risk profile, HDFC Balanced Fund’s five-year return of 14 per cent beats the average returns of pure equity funds, which were at 9.5 per cent. In the past one year, the fund has posted 7.25 per cent returns while the bellwether indices Sensex and Nifty have delivered losses of 6-7 per cent. To peg down the risks, the fund dedicates around 70 per cent of the investment to equities and keeps the balance in debt. Investors can also take the SIP (systematic investment plan) route to protect against market volatility.

Portfolio and strategy

On the equities portion, the fund has made well-timed moves into and out of sectors. After riding the strong rally in the IT sector in 2013, the fund started to trim its allocation and shifted focus to the banking space.

This timing yielded good returns, with private bank stocks such as ICICI Bank and Axis Bank having had a great run during the year 2014. Defensive sectors software and pharmaceuticals are the other top preferred sectors after banking. The rally in pharma sector also boosted the fund, with stocks such as Aurobindo Pharma and Torrent Pharma turning multi-baggers in 2014 and 2015.

Industrials, construction and petroleum products are among the preferred sectors currently. The fund is among the more aggressive ones on mid-cap allocations and half of the portfolio is invested in the mid and small-cap stocks (market cap is below ₹10,000 crore) such as Rallis India, Navneet Education and MM Forgings.

In the last one year, the fund has reduced its exposure to corporate debt and has instead increased allocation to government securities.

This move may have been to help it take advantage of the reversal in rate cycle. With G-Secs rising sharply, this shift is likely to have paid off for the fund. It has allocated almost 20 per cent to this segment now. The fund also invests in high-quality financial institutions with the highest AAA rating, keeping an eye on safety and low risk.

Tata Sons, Shriram Transport and Power Finance Corporation are some institutions in whose bonds and debentures the fund has invested.

Overall, a good fund to own for its active management of both equity and debt portfolios.

Published on September 13, 2015

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