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Moving Steadily

The only fund in the balanced fund category that provides growth with higher stability.

This fund is shining bright with five stars after a washed out performance in 1999. Truly stupendous, considering in 1999, Canpremium (RO), ranked in the bottom quartile. A 4-star till recently, however, this fund has beaten category peers by wide margins across time periods. It is the only balanced fund with a 60:40 debt-equity orientation. It's this conservatism that makes this fund worth the five stars.

After failing to double investments in five years in its closed-end garb, this small-size fund shrank in size after turning open-end in early 1998. Diversifying without focus on a small stock portfolio saw the fund underperform peers during FMCG, tech and pharma-led rally in 1999. In early 2000, when tech rally was on, in a one-off incidence it switched composition by taking 51.82% equity exposure. But soon rebalanced its allocation, and, hence, did better than its peers during the tech crash.

Today, with size reduced to Rs 6 crore, it manages equities more smartly. It trades more frequently and is always on the prowl for good bargains. For instance, this fund acquired Castrol India for a small duration (1 month) in August 2001, ahead of its buyback in September 2001. However, picking up a 13% stake in State Trading Corporation -- a new entry in the portfolio in May – can be alarming. On a small asset base, a huge exposure in a particular stock could hamper returns.

That apart, this fund loves to make wild allocation moves. For example, in September 2001 and February 2002, this fund decided to sit on cash. Though in October, it quickly piled up stocks, but its conservative stance proved too costly in February this year. Caught on the wrong foot, the fund lagged behind its peers during the month.

On the debt side, its focus has shifted from corporate bonds to government securities, which account for 51.47% of its assets. And here too, concentrated positions in just 1-2 securities could be painful as gilts fall faster in uncertain times.

So, conservative investors who are expecting ballistic returns from this fund would be pushing their luck too far.