K Balance seeks capital appreciation and regular income with a portfolio spread across equity and debt. The fund moderates its aggressive stakes in equities through a disciplined allocation of 60:40 between stocks and bonds. With a well-diversified stock portfolio throughout its tenure, this fund defies a common saying that the virtues of diversification are easy to preach but hard to follow. While this may not have catapulted into a ballistic long-term performance but is a standout against less disciplined balanced funds.
An aggressive growth philosophy guides its investment in equities, large-cap strong names in IT and old economy gather at the top of its portfolio. And the mid-cap stocks form the balance, with a close eye on an opportunity to seize the upturn from these holdings. During the healthy market phases, like those in 1999 when the fund was launched, its large-cap holdings gave a boost to the returns. Its NAV has gained 40 percent in three months of its launch. A good part came from the fancied IT stocks as well. The sky-high valuations did not lure the fund, it restricted its tech exposure to an average 22 percent. Unlike its tech-stuffed peers, the fund did not turn in spectacular returns, but surely its investors were less injured in the successive quarters of downfall. The much-needed cushion came from healthcare and other diversified picks, which were less hurt than the new economy stocks.
While the large-cap stocks put up good show in boom times, it's the mid and small sized stocks which flourish in recession. As its marginal possessions in such long-held stocks has gained steam now, the fund doesn't shy away from buying in the short-theme stories or the ones which call for patient investing like PSU stocks. The fund claims that though volatile, the mid-cap holdings offer high trading opportunities. And any liquidity concerns are well taken care off by its bond portfolio.
On the fixed income side, the fund has largely held a small and concentrated portfolio of corporate bonds and government securities. While the former adds stability, the latter comes in handy to manage liquidity issues on the equity side.
Though in the last trailing year, it has posted a handsome 18.38 percent as against the category average of 17.23 percent, its current NAV at Rs 9.89 will call for patience as K-Balance is not likely to loose its theme to chase returns. The mid-cap orientation of its equity allocation can be unpleasant on occasions. But for its diversity and discipline, K Balance should prove to be a good long-term holding.