A well-diversified portfolio of stocks, well-spread sectoral allocation and the perseverance to hold on to good stocks over the long haul show that discipline is all what it takes to be a well-run balanced fund. Sundaram Balanced seems well aware of its priority of sheltering investors' returns.
The fund's aversion to take risks can be gauged from the fact that while it has participated in all market driven rallies, be it a PSU bank rally in 2003 or tech boom of 2000-01, but the magnitude of such participation is not as high as its aggressive peers. Gains and risks were also curtailed down to the extent of such participation.
The fund didn't indulge in accumulating overpriced tech stocks in 2001, nor did it show any exuberance in picking bank stocks in 2003, thus displaying its aversion to being over-weight on any particular sector in a rally-driven market. Of late, it reduced its exposure in technology to just below 4 per cent as also in banking but has continued with SBI (since September 2001) which rode the rally with gusto.
The fund has successfully tackled the ups and downs of the equity markets with ease—it lost just 4 per cent in 2001 compared to 9 per cent for the category when bear phase was on. Similarly, in 2003, when markets were rejuvenating itself from a long tranquillity, the fund delivered the results.
Lately, the fund has increased its corpus in equity with mid-caps holding a major chunk. This is a brave step, as the mid-caps by nature are the most volatile—they were highly volatile for the past few months—and such a fund can't afford to handle too much of heat.
On the debt front, there has been a qualitative shift in the portfolio from AA rated bonds to AAA bonds. The exposure has increased to 26 per cent in March 2004 from just 5 per cent in January 2004. Gilts have not been the flavour for this fund in most part of its tenure.
Despite increasing exposure to volatile mid-caps, the fund has been able to consistently generate returns with a reasonable degree of stability. Those who don't want to ride the volatility wave should consider this fund.