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Investments Driven by Research

Chirag Setalvad, fund manager, HDFC Balanced Fund, talks about the simple research-driven investment philosophy behind the fund's equity portfolio

Chirag Setalvad, fund manager, HDFC Balanced Fund, says they are medium to long-term investors and their investments are driven by fundamental research.

Investments Driven by Research Chirag Setalvad, fund manager, HDFC Balanced Fund

What is your approach to managing the equity portfolio of this fund?
Our investment philosophy for equities is simple. The key belief is that over time stock prices reflect their intrinsic values. We are medium to long-term investors and our investments are driven by fundamental research with a medium to long-term view. Further, to create wealth over time, in our opinion, the key is to minimize mistakes, particularly large ones and therefore we emphasize the price of purchase and avoid buying assets, overvalued with a long term view. Key tools to achieve this objective are (i) target a margin of safety, (ii) effective diversification in line with the mandate and (iii) limit investments to companies of acceptable quality.

What is your approach to managing the fixed income portfolio of this fund?
The focus on the fixed income side is to buy the issuances of good quality companies and hold them till maturity. The duration of the portfolio is adjusted keeping a long term view of interest in mind. With inflation having come down and interest rates likely to soften as well, we have increased the average duration of the portfolio in the last one year.

How often do you re-balance your debt and equity allocation?
We aim to invest 70-72% in equities at most times and the balance in fixed income. As the allocation to equities approaches the top end of this band we re-balance the portfolio and vice versa.

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