Balanced fund investors may not be pleased with losses of recent years, no matter how small, but the fund's longer-track record, its superior relative performance and greater consistency indicates ample reason for hope.
21-Jan-2002 •Research Desk
Zurich India Prudence, a hybrid fund seeks long-term capital appreciation with periodic returns. The fund maintains its equity and debt allocation around 60:40 ratio. The fund is guided by a simple yet pertinent philosophy that wealth building is about earning reasonable returns with higher consistency and avoiding big losses. It is not about earning very high returns periodically in volatile times, for returns earned over long-term can get wiped out in relatively short period.
Following its philosophy, the fund has been able to perform with greater stability than peers, across all time periods. The fund's stock portfolio is spread across quality growth stocks and the debt component usually focuses on high yielding corporate debt instruments and extends its ambit towards government securities only when there is a possibility of fall in interest rates.
Consistent with its allocation strategy to have equity and debt mix based on the expected risk-adjusted return, in its initial years Zurich Indian Prudence leveraged the prevalent high interest rates and was concentrated on high yielding corporate debt instruments. With turnaround in the sentiment for equities in 1999, the fund rebalanced in favour of select stocks. The equity portfolio was concentrated in large-cap FMCG stocks. The fund went ballistic in 1999 posting a 104 percent return. In the tech lead boom of 2000, a moderate stance in the racy technology sector relative to its peers helped it retain stability. The fund lost 8 percent through 2000, but was better than 65 percent of the peer group, who lost an average12.41 per cent.
In another tough year for equities through 2001 the fund lost 2.88 per cent, which still looks decent against the group which fell by 8.21 percent. This was despite technology being the top sector early during the year. But overall, the fund played defensive with increased emphasis on automobiles, consumer and health care stocks. The bond allocation of the fund was also benefited from timely exposure to government securities during the softening of interest rates in 2001.
Of course, balanced fund investors aren't likely to be pleased with losses of recent years, no matter how small, but the fund's longer-term record, its superior relative performance and greater consistency indicates ample reason for hope. Zurich India Prudence is a strong choice for investors looking for a one-stop exposure in stocks and bonds.
