Even though the first three years after its May '99 launch weren't anything to write home about, DSPML Balanced's sparkling performance over the last year suggests that the fund deserves a closer look. Since October 2002, it has outperformed the average balanced fund in every quarter.
The fund's equity portfolio has generally been well diversified and its debt portfolio has had quality bond holdings without being too volatile. During most of 2000 and 2001, DSPML Balanced's returns were enough just to keep it in the third quartile of the category. Although it maintained a 60:40 equity-debt mix, its overexposure to technology and FMCG stocks kept things depressed. Then, in first half of 2001, this high tech exposure along with the poor performance of its large-cap holdings like ITC, SBI and Reliance spoilt returns.
While the fund reduced its tech exposure after 9/11, this did not prove to be a great move as the sector gained handsomely during that period. In early 2002, high exposure to the then-hot favourite energy sector helped DSPML Balanced maintain ground but in the subsequent two quarters, its large-cap buy-and-hold strategy failed to set its NAV graph on fire.
DSPML Balanced's fortunes finally turned in the last quarter of 2002 when the overall sentiment in the equity market revived. What is more interesting though is its consistent outperformance to its peer group since then. Fund manager Anup Maheshwari's sector bets and stock picks have paid off. During this period, top-performing sectors like pharma, energy and financial services have accounted for nearly half of the fund's equity assets. Picks like ONGC, Ranbaxy, SBI, Canara Bank and PNB have made large gains in the rally.
The fund's debt interests have mostly been in AAA bonds and gilts, which along with a sizeable cash allocation have helped it guard against losses in the volatility that fixed income faced during the third quarter of 2003. However, during this year, its average cash allocation has been a high 20 per cent, which is some cause for concern.
Overall, DSPML Balanced Fund's turnaround story is impressive. If the fund is able to maintain this new-found edge over its peers through the next market cycle, it could well become a favorite with conservative investors.