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Simple and Effective

Don't expect miracles in Prudential ICICI Balanced, though it will take you to your goal in a stable fashion. The last four calendar years are testimony to this fact-it has consistently been delivering an above average return.

So far this year, the fund has kept its record intact—as on September 8, 2005, Prudential ICICI Balanced is up 26.53 per cent against the category average return of 21.69 per cent.

High exposure to auto, healthcare and metal stocks has slowed down the fund's growth in the recent times. However, some good picks in engineering, construction, services and consumer non-durable sectors have more than compensated for it.

Like most funds launched at the peak of the tech bubble, it had to face difficulties. But the fund realised its responsibilities as a balanced fund and returned to the script of conservatism and measured risk that a balanced fund should be following at all times. Consequently, from the bottom quartile in 2000, the fund has gradually inched its way into the top half of the category.

The fund learnt a few good lessons from the tech disaster that saw its 68 per cent gains in five months end into a 45 per cent loss by the end of 2000. Since then, it started to spread its assets across various sectors. While it has lagged behind its aggressive peers during the sectoral rallies, the caution has paid off during bear markets. In recent times, it has cut allocation to energy and metal stocks, while beefing up auto, chemical and basic engineering sectors.

In terms of capitalisation, the fund has started to invest heavily in riskier mid- and small-cap stocks in recent times. In the first eight months of 2005, its allocation to these stocks was around 46 per cent. But it has managed this increase with more number of stocks, which reduces the risk of the portfolio. From around 20 to 25 stocks in 2004, the number has gone up to 35-40 stocks this year.

On the debt side, as interest rates marched north, the fund decreased its debt allocation—at July end, debt exposure was at an all-time low of 12.61 per cent.

Overall, Prudential ICICI Balanced doesn't take an aggressive stance on either of the two asset classes, and conservative investors will find this fund's style to their liking.