• Sensex down 1132 to 8640. Nifty (worst fall ever) down 386 to 2557. #

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Investors can buy the units of HDFC Prudence, a balanced equity-oriented fund, considering its long-term track record in delivering returns and ability to contain downside as a result of hedge offered by its debt exposure. The fund?s balanced structure may, however, limit it from benefiting as much as top diversified equity funds during market rallies. It may, therefore, be suitable for investors with a low-risk appetite.

Over a five-year period, HDFC Prudence is one of the best performing balanced funds with a return of 26.8 per cent compounded annually. This compares favourably with a good number of diversified equity funds. With a mandate that allows it to move to debt substantially, the fund may be well placed to not only contain downside risks from equity but also benefit from rallying interest rates.

Performance: HDFC Prudence has managed to beat its benchmark ? the Crisil Balanced Fund index ? over a three and five-year period. While it has trailed its benchmark over the last year it has, nevertheless, managed to contain losses better than indices such as the Sensex and the Nifty. The fund has, over a long-term period, delivered returns superior to peers such as FT India Balanced and DSPML Balanced fund.

During market rallies, the fund may not be able to fully participate to deliver superlative returns, given its debt exposure. It may at best deliver steady returns. The fund has so far retained its bias for equity (about 75 per cent of assets at present) and kept its debt holding limited when compared to other balanced funds. But importantly, during phases of market fall the current year, the fund has contained losses better than its benchmark.

Strategy: HDFC Prudence has around 40 per cent of its portfolio in midcaps (with less than Rs 7,500 crore market cap) stocks and has retained this proportion for over a year. This strategy worked well for the fund during last year?s market rally. The fund also invested in momentum sectors such as capital goods, banks and power. It does not indulge in heavy churning in sectors. But exposure to defensive sectors such as pharmaceuticals and consumer non-durables has seen an increase.

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Mr Kenneth Andrade, Vice-President of Equity at IDFC Mutual Fund, having over 14 years of experience in equity research and fund management, spoke to Business Line about the mutual fund scenario in the country.

Infrastructure Development Finance Co (IDFC) took over Standard Chartered?s mutual fund business in India in March. Currently, the fund house manages assets under management to the tune of Rs 12,255 crore.
What do you have to say about markets at this point?

In the current macroeconomic environment, equities are not the most-favoured asset class, so there is a lot of money going into alternative assets, and as long as the fixed maturity plans, and debt markets continue to give double-digit returns, the appetite for equity will be low. I think that the way we are valued or the way the market is trading, we have a market which is already reasonable in terms of multiples.

retweeting @manuscrypts

with a name like that, its no wonder that the sensex gets screwed regularly problem is I do too, by association!

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