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| Three worthy picks |
| BS Reporter / Mumbai Mar 07, 2010, 00:04 IST |
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BIRLA SUN LIFE '95
This is an open-ended balanced scheme and did well in recent times. Its five-year annual returns are 21 per cent (as on March 3), five per cent higher than its category. However, the fund had its ups and downs.
The fund takes contrarian stands occasionally and focuses on growth stocks. Half the equity portfolio comprises mid- and small-cap stocks, but the fund manager plays safe by ensuring that the portfolio is not concentrated. It has had an average of 42 stocks in the past one year with no stock holding more than six per cent of the portfolio.
On the debt front, the fund opts for G-Secs and bonds. The debt portfolio is actively managed, but the fund manager likes to stretch the maturity and go for duration calls.
By its mandate, the fund keeps its equity allocation between 50-75 per cent. The upper limit was tested a few times, but averaged 69 per cent in the past year. The equity portfolio has never fallen below 55 per cent. It is used to earn returns, while debt is used to safeguard in testing times.
Overall, the fund's long-term performance makes it a good pick.
DSPBR BALANCED
This fund had quite a slow beginning. It didn't put in a noteworthy performance in the first three years of its launch, but has shown commendable consistency in the past three. It delivered more than the category average in bull runs and shed less than the category in bear phases. The fund plays it safe and does well.
It is an open-ended scheme, with a mandate to invest 65-75 per cent in equity and the rest in debt. The fund followed this mandate at most times. The fund manager likes to have a diversified portfolio in terms of both stocks and sectors. Last year, the equity portfolio had an average of 73 stocks, but the allocation to the top five holdings was below the category average. The manager likes to invest heavily in mid- and small-cap stocks. There have been times when large-caps accounted for less than half of the equity portfolio.
The fund manager plays it safer on the debt side. He sticks to high-quality, low-maturity papers, investing primarily in floating rate papers and government bonds. He refrains from investing in debentures and commercial papers. This approach allows the fund manager to balance the credit as well as interest rate risk.
This is a safe fund and will not give you headline-grabbing returns, but it won't take you through earth-shattering downfalls either.
HDFC PRUDENCE
In the first 10 years of its existence, 1996 to 2006, this fund beat the category average every single year. However, doubts were raised when it performed averagely in 2007 and 2008. It then silenced every sceptic by the best performance in its category in 2009.
The fund manager has been at the helm of this scheme since its inception. He likes to stick to his beliefs, the current trends don't bother him. The fund's mandate allows equity allocation to be between 40-75 per cent. The fund has stayed within its equity limit, averaging 70 per cent since mid-2006. The manager had a high equity allocation in 2008, most of it in lower caps. This was why the fund performed averagely in 2008, but also why it topped the category in 2009.
The manager keeps the portfolio well diversified with respect to both stocks and sectors. Over the past year, the average number of stocks have been around 60. Since 2006, the allocation to the top five stocks did not go beyond 20 per cent.
On the debt side, the fund manager takes small exposures in structured debt and G-Secs. However, on the whole, he prefers bonds and debentures of the financial services sector.
This fund is the biggest in its category, and also the best. It reaped benefits for its investors with the five-year returns of 24 per cent (as on March 3), against the category's 16 per cent. These numbers make the fund a very good pick.
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