This one surely doesn't believe in the age-old adage, slow and steady wins the race. The near-maniacal hurry to grow fast has brought Birla Balance fund on its knees. Having realised it erred, it is now trying to set its house in order. In its attempt for a makeover, it has been somewhat passive in striking the right balance between return and volatility. But despite a shift in stance --- from 'aggressive' to 'conservative' --- in recent times, this fund has failed to stem the downslide.
Before moving forward let us take a step backward and look into the reasons that have landed this fund in the soup. The fund --- launched just before the tech boom in October 1999--- started off with a high equity allocation of 70%. Its net asset value skyrocketed by 80% within 4 months of its launch thanks largely to the tech stocks in its kitty. Tech stocks alone accounted for more than half of its portfolio with Infosys, Satyam and VisualSoft together constituting over one-third of the portfolio. By March 2000, the fund's equity exposure had touched a high of 80%. But then came the bad news: the tech boom was over. The result: the fund's aggressive equity stake dragged down its returns. The fund lost 26.93% through 2000 and ended up as the back-bencher in its category.
Birla Balance has largely been an equity-focused fund with bonds accounting for less than one-third allocation. Moreover, this fund has a fetish for high-quality corporate bonds with little exposure to gilt. To boost returns, however, the fund has also parked 10% in AA and below-rated instruments. Although risky, these instruments do provide a higher coupon income. The fund has mostly opted for short to medium-term paper with an average maturity of 1.5-4 years.
It is clearly evident that the fund hasn't got much right in its short stay so far. Since its launch, the fund is down 13.23% as against peer's 19.64% return over last one year, as on April 12, 2002. Investors seeking a hybrid fund as a safe haven will surely want to look elsewhere.
However, don't call its quits just yet on the fund. At least till the time you have looked at the possibilities that could emerge as a result of the change in tack by the fund in the past few months. It is apparent that the fund is trying to make up for lost ground. Case in point, today healthcare sector accounts for one-fifth of its portfolio with the technology sector taking a back seat with 9.92% exposure. That apart, the fund's overall portfolio has become more diversified -- spread over 31 stocks. This rather conservative approach has helped the fund in reducing volatility and preventing a downslide. But still a lot of ground needs to be covered before it can be termed as a good balanced fund.