There was once a time when the superstar funds of the mutual fund industry were the ones most sought. These were the funds that posted impressive figures, beating the category averages by huge margins and churning up a massive fan following which wanted more of the same. Compared to them, the ordinary funds---those that were steady but stayed in line with the category average---were left out of the limelight.
But now the times have changed. The superstars, which were invariably heavy on mid- and small-caps or sectoral, have fallen hard. And it is now that the ordinary funds, which are diversified and biased towards large-caps, have become funds to reckon with. One such fund is Franklin Templeton India Balanced.
This consistent performer's loss in the market downturn has been lesser than that of its category, by four per cent. Over the past one year ending 31st March 2009, the fund has reported a fall of 23 per cent. The fund had nearly 91 per cent of its portfolio allocated to large-caps in December 2007, which helped cushion the fall. All through 2008, the fund's exposure to large-caps averaged around 88 per cent, as compared to the 58 per cent of its category.
While the large-cap bias helped the fund in remaining afloat through the crisis, the same bias had limited its returns in the bull run of 2007, when the fund reported earnings of only 43 per cent, albeit in line with its category average. During that year, BSE Mid-cap rose 69 per cent while the Sensex was up by 47 per cent.
However, the fund's annualised returns over the past five years of 12 per cent have been better than its category's 10.47 per cent. This manifests the fact that the fund is a consistent performer and ideal for a smooth long ride. In its history of nine years, the fund has never delivered less than its category.
The fund follows a disciplined approach for its asset allocation. Although it is never seen utilising the leeway to bring down the equity allocation (except for one month-July 2001) to about half, it hasn't exceeded the defined maximum limit of 70 per cent either. Its equity allocation has averaged to 65 per cent since inception.
As far as the sectoral allocation is concerned, financial services has always been among the favourite sectors of the fund. Since May 2005, the sector has consistently been in the top three sectors of the fund.
In 2007, the fund increased the exposure to the sector to as high as 23 per cent in December from 11.58 per cent in January. But after the sector got hit in the first half of 2008, the fund manager lowered it to 16.34 per cent in June 2008. It currently stands at 14 per cent. Other favourite sectors of the fund are engineering and diversified.
Stocks like Larsen & Toubro (2.59 per cent), Grasim Industries (4.23 per cent), ICICI Bank (3.17 per cent) and Infosys Technologies (3.80 per cent) are among the prime holdings of the fund, which have appeared for more than eighty months in the fund's portfolio.
The portfolio of the fund looks fairly diversified with around 38 stocks. Furthermore, allocation to a single stock is rarely seen exceeding seven per cent in the recent years.
On the debt side, a large portion (around 22 per cent since inception) of the fund's portfolio is invested into debentures. Among the debt instruments as well, financial services is the favourite sector of the fund with an average allocation of 11.31 per cent since inception. The fund manager has recently been increasing the allocation to debentures of the energy sector. From less than one per cent allocation in November 2008, it has increased to 11 per cent in February 2009.
Overall, its diversified portfolio with a large-cap tilt make the fund suitable for tiding over the rough weather as well as earning consistent long-term returns.