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Defensive Winner

This fund may not be the boldest of balanced funds but it gets the job done. A conservatively managed equity as well as debt portfolio means the focus is on stability and not on extraordinary returns

Performance in the last two calendar years looks mediocre, primarily because this large-caps admirer has found it difficult to match the pace of some of the aggressive peers who have flourished with a portfolio laden with mid-cap stocks. Look beyond and the picture starts to turn rosy. Over 18 per cent annualised return since launch in December 1999 makes it one of the most consistent options in the balanced funds category.

Notwithstanding recent troubles, the fund's performance is worth a praise. It did not have a great start--the fund lost a sixth of its value by 2000-end. However, it recovered soon after. In tough 2001, the fund managed to hold its ground even as stock markets fell--it lost 4.64 per cent compared with peer's 9.88 per cent fall.

It did well the next year too. On the back of 20 per cent plus allocation to PSU stocks, the fund gained 18 per cent to find a place in the top five performers of the category.

In 2003, the fund capitalised on stock markets' rally and gave a 73 per cent return. However, the fund's rank slipped in the second quartile as some of its mid-cap counterparts did much better. The fund faced similar problems in 2004 and 2005 when the tide ran in favour of medium and smaller companies. From the start of the current year, the fund has put up an average show with gains of 6.31 per cent vis-à-vis the category average return of 6.85 per cent.

The equity portfolio consumes 60 to 70 per cent of its assets. This gives the impression that the fund is aggressive. However a close look will reveal that the fund manager restricts the stock universe to quality large-cap companies spread over 35 to 40 stocks. He gives due importance to mid and small-cap stocks but never chases them.

On the debt side, the fund's preference for quality is obvious. Top-rated corporate bonds and gilts form the core of the debt portfolio. In January, the fund had no investment in below AAA-rated papers.

A cautious investor, who prefers peace of mind over flashy returns, should like this fund for its large-cap equity portfolio and safe debt papers.