A highly disciplined approach and a stable performance across market cycles could make anybody envious of Zurich India Prudence. After all, the fund's trailing 3- and 5-year returns figure among the category toppers. This balanced fund also has the distinction of beating an average equity fund's returns of 18 per cent in 2002. Heavy concentration on quality and a well-diversified portfolio has helped this fund register an incredible performance.
With a focus on favourable risk-reward ratio, Zurich India Prudence has consistently maintained a 60:40 equity-debt allocation. The fund gets into equities when markets are down and books profits when markets move up sharply. While this strategy has improved the fund's long-term prospects, during some periods it may marginally underperform the category as was the case when the tech-led rally in 2000 was almost nearing an end.
Unlike his aggressive peers, fund manager Prashant Jain has actively re-aligned the sector allocation without going overboard. At the peak of the tech rally in February 2000, this fund had just 8.4 per cent in tech stocks, and FMCG was its top sector holding. Through 2001, the fund was heavily invested in auto, and in 2002, energy and technology sectors were its top picks. That Jain has a knack for spotting good companies is evident from the fund's recent performance. In a not-so-healthy equity market of 2002, an annual return of 24.68 per cent helped Zurich India Prudence topped the category. Sighting attractive valuations, Jain increased PSU exposure from an average 10 per cent in 2001 to 20 per cent in 2002. He also added Bharat Forge, TISCO and SBI, which have justified their selection. Jain's foresight was evident when he got rid of HCL Technologies in February 2002, and its share price fell drastically in subsequent months. Also, he booked profits in ONGC in August 2002.
On the debt side, the portfolio has comprised largely high-quality bonds. Initially, it was AAA bonds that boosted the fund's return, and lately, it has done well due to high gilt exposure.
Those seeking a safe haven are unlikely to find a better hybrid fund than this one. A strong performance across market cycles makes this an ideal core holding among balanced funds.
This article was originally published on April 28, 2003.
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