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ICICI Prudential Balanced seems to be finally coming of age. It has had a gloomy past but the fund seems to have come over it. A wait and watch route for investors is recommended

ICICI Prudential Balanced has hit a few potholes, but it still has potential. Investors shouldn't be overly concerned about the fund's recent underperformance. The fund held some names that didn't execute well this year and also lost out on the rally in the basic and engineering segment. But the fund manager deserves credit for his timing in metal stocks and his deft maneuvers in the tumultuous technology space. Infosys is a case in point which it sold in February 2007 and picked up at a significant discount in August. The fund has also benefited immensely from its telecommunication holdings.

Investors may well remember how the fund lost tremendously during the tech bust, (-)46.25 per cent for the year ended March 2001. But now the fund sticks to diversification across sectors and lack of concentration in any stock. It also has a serious large-cap tilt with 2/3rd of its portfolio in large caps.

The fund has remained in the top half of the category year after year, but you won't find it at the head of the pack. What you can expect it to do is contain losses in a downturn. Since 2004, the fund has performed better than the average peer during market slumps. Over the June 2006 quarter the fund contained losses to (-) 6.36 as against the category's loss of (-) 7.97 per cent. During the slump in the March 2007 quarter, the fund regressed by (-) 3 per cent while the category was set back by (-) 3.23 per cent. Apart from this there has been a marked improvement in portfolio rebalancing over the past eight months, with an average 73.7 per cent allocation to equity.