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Well balanced

Pradeep Gokhale, Senior Fund Manager, Tata Balanced says the fund's equity portion is managed through a basket of 5-8 stocks per sector while the debt portion is guided by the principle of SLR - Safety, Liquidity, Return

Pradeep Gokhale, Senior Fund Manager, Tata Balanced says the fund's equity portion is managed through a basket of 5-8 stocks per sector while the debt portion is guided by the principle of SLR - Safety, Liquidity, Return.

Well balanced

What is your asset allocation policy / strategy? (Do you try to surrogate equity with arbitrage positions?
Our equity allocation for Tata Balanced Fund is between 65% to 75% of the portfolio. We do not take large cash calls in the equity portion and don't try to time the market. Therefore, our equity allocation is closer to the higher end of the permissible range. The balance is invested in debt securities. We do not take surrogate equity positions through the arbitrage route. Our equity positions are pure, long only equity positions.

What is your approach to managing the equity portfolio of this fund?
We primarily follow the Growth at Reasonable Price (GARP) approach with a very strong bias towards quality of businesses and managements. In some instances, we also buy and hold on to high quality businesses even at slightly higher valuations for longer period of time to gain from the compounding characteristic in topline and profits. We also, at times, take some tactical positions using value strategies, to take advantage of valuation differentials. The equity portfolio is managed like a diversified fund with a mix of large and mid cap stocks. Large-cap and mid-cap proportion is maintained at 40-45% and 30-35% range within 75% of equity allocation. Each sector is played through a basket of 5-8 companies. Top holding is ~4-5% and then there is a tail of 55-65 stocks to reduce concentration and to capture more opportunities.

However, we do not take surrogate equity positions through the equity arbitrage route. All our equity positions are pure long only equity positions.

What is your approach to managing the fixed income portfolio of this fund?
The guiding principle of our debt fund management process is SLR - Safety, Liquidity & Return. The fund mainly invests in medium to long dated liquid sovereign and higher rated corporate bonds and money market instruments. The fund follows an active duration management approach to manage interest rate risk and generate alpha, based on the prevailing macro-economic situation in the economy. Towards this, end, the fund generally keeps an overweight position on sovereign bonds as they are highly liquid. Besides, the fund takes exposure to only high quality AAA papers, avoiding exposure to lower rated debt instruments.

How often do you re-balance your debt and equity allocation?
Debt and equity are re-balanced on a dynamic basis. As we do not take large cash calls and try to time market, the equity allocation remains on the higher side. Because of dynamic re-balancing, buying on dips and profit booking at higher prices happens regularly, which helps in the long-term.

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