You won't find this fund topping the charts, but neither will you find it at the bottom of the ladder. This one does what a balanced fund is supposed to do - play it safe.
The fund sticks to its equity mandate of 65-75 per cent. Though there have been instances when it has dipped below 65 per cent, it has never crossed 75 per cent. It upholds its large cap bias but is not averse to smaller stocks. In 2007, it decreased its large-cap allocation between January (52%) and September (36%). In the recent market run up too, it reduced its large cap exposure between February (64.44%) and May (46.41%) 2009.
Apoorva Shah took over in June 2006 and maintains a well diversified portfolio that has averaged at 75 stocks in recent times, though in May 2009, it touched 83. Naturally, the concentration of the top five holdings is way below the category average.
By May, there was an obvious reduction in exposure to defensives while aggression was seen in Energy (17%) and Financials (10.55%), with other sectors holding an allocation of less than 7 per cent. But now, he claims to be once again betting on defensives. “We had turned aggressive but are now more balanced. Though we believe the economy is bottoming out, the pace of growth of stock prices is higher than the pace of growth of recovery. So there will be a reality check in the market and we expect to get the recovery stocks cheaper which would include Metals, Engineering and Real Estate,” says Shah. One wonders about real estate but Shah is focussing on “companies that have been able to raise funds which has helped them de-leverage and improve their balance sheet, have launched new projects at cheaper prices and have got rid of their inventory of land.”
On the debt side, the fund tries to keep risk to its minimum by sticking to high quality and low maturity paper. Unlike its peers, it has refrained from extensively investing in debentures and commercial paper. It prefers to invest in floating rate paper and government bonds and in this way, balance the credit as well as interest rate risk.
You won't find this fund collapsing like a pack of cards but neither will it deliver trailblazing returns. For instance, in the bear hug running from January 8, 2008 to March 9, 2009, the fund shed 38 per cent (category average: -43%). But in the rally that immediately followed (March 9 - June 30, 2009), it delivered 42.55 per cent (category average: 49%). And therein lies its appeal.