This fund is for those who prefer stability over flashy returns. A strong focus on quality - both on the equity as well as the debt portion of the portfolio - is the hallmark of this fund.
The fund has stuck to its large-cap orientation, but still got the job done in the mid-cap driven rally of the past three years. Obviously, the fund has not been a chartbuster, particularly in the past two years, as some of the aggressive balanced funds with higher mid-cap allocations have raced ahead. But its five-year annualised returns of over 34 per cent make it a very compelling option for any balanced fund investor.
After being launched in December 1999, it did not have the best of start, as the markets tumbled soon after and the fund lost a sixth of its value by 2000 end. But the lessons were learnt quickly and the fund negotiated the year 2001 very well, losing only 4.64 per cent compared with its peer's 9.88 per cent fall.
The good performance continued next year as well. A high allocation to PSU stocks (in excess of 20 per cent) helped it gain 18 per cent. The fund slipped to the second quartile in 2003, and later in the second half of the category in 2004 and 2005. This was the time when mid-caps were surging, as a result, some aggressive balanced funds did well. But in the aftermath of May debacle, the fund's performance looks impressive. Since the start of the year till August 6, the fund is up 9.3 per cent, higher than the category's 7.2 per cent gain.
The fund is not conservative while allocating asset. On most of the occasions, equities consume more than 65 per cent of its assets. But within the asset classes, the selection of particular securities reflects a strong focus on quality. A chunk of the equity allocation is invested in large-caps, and the portfolio is well spread across 35 to 40 stocks.
On the debt side, the fund used to invest considerably in below-AAA rated papers. But since the middle of 2004, they have become a rarity. Top-rated corporate bonds and gilts form the core of the debt portfolio. 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.