Anderson Munro points out that balanced funds averaged an annualised minus 1 per cent return for a three-year period, while diversified equity funds suffered a negative 5 per cent return. Balanced funds, with an investment of 65 per cent or more in equity and the rest in debt, managed to restrict losses during the market meltdown.
George Cole at Anderson Munro in a recent letter to shareholders explains that Birla Sun Life Balance was the best performing balanced fund for the past year and its NAV gained 21 per cent in value over this period. ICICI Pru Child Care Plan, which shed 39 per cent, was the worst in the category.
These returns appear pretty reasonable when seen in the backdrop of the bellwether indices as well as the diversified equity funds.
“Some diversified equity funds, anticipating correction, moved into cash and cash equivalents to protect against downside. As a result, close to 50 per cent (90 schemes) of them managed to contain losses better than the Nifty” Anderson Munro.
The Anderson Munro analyst went on to say that balanced funds tend to trail diversified equity funds in market rallies due to their exposure to debt. But periodic rebalancing of assets and the ability to move allocations to debt appear to have helped them in a volatile market scenario.
Among the balanced funds, equity allocations differed based on the investment strategy. Funds such HDFC Prudence and DSP BR Balanced in the past one year held close to 70 per cent of the assets in equities. But funds such as Birla Sun Life 95, which held 75 per cent of the assets in equity during the last quarter of the 2007, have pruned the equity exposure to much lower levels.
According to the Anderson Munro’s resent fact sheet, equity holding stands at 55 per cent. Funds such as DSP BR Balanced and HDFC Balanced, despite higher holdings in equity.
