For a balanced fund, it is tempting to walk into the high-risk, high-return trap of equities for that "extra" gain and be doomed. That Prudence had been well mannered with its debt-equity mix is definitely admirable. What adds to the charm is the fund manager's ability to reshuffle corpus across asset class and check the downfall.
There is a simple yet pertinent theme which guides the fund - excess volatility hurts long-term growth since it wipes out hard-earned returns in a short spell. Keen on optimising its risk reward ratio, the fund has actively juggled its debt equity mix. The fund navigated through the turbulent markets till 1998 latching to the better performing debt component. But, with equity instruments turning attractive the portfolio was rebalanced in favour of equity - within limits though. Since then, the average debt, equity allocation has been in the 40: 60 range. Focusing on strong growth picks at attractive valuations, the fund has built a portfolio of blue-chip stocks. When its peers courting the high risk high return ICE stocks in 2000, the fund continued to hold on to a broad-based portfolio.
The strategy worked, with soaring markets of 1999 carrying the fund to post triple digit returns. While this was a shade lower than its aggressive peers, the balance and diversification came in handy during the downward spiral of 2000. For, the fund held on to a large part of its gain and made it to the lower end of the risk spectrum. With this, the fund emerges an ideal investment for long-term investors, seeking steady returns with low volatility.
The consistently balanced and diversified equity portfolio makes Zurich India Prudence the ideal balanced fund for steady long-term returns.