- Editor Rating
- Rated 5 stars
- HDFC Balanced Fund
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HDFC Balanced Fund is a scheme which aims to generate capital growth along with current income through a portfolio consisting of a combination of equity, debt, equity linked, and money market securities. In normal conditions, the fund has around 65 percent investment in equity instruments while the rest is allocated to different debt securities.
Presented below is a comprehensive review of this fund which will give you all the required information that you need to make a better choice about whether to buy, sell, or hold this fund.
Basic costs and other information
HDFC Balanced Fund was launched on September 11, 2000. Such longevity of the scheme means that it is popular and has been performing well. As of 31st May 2017, this equity-focused fund has assets of INR 11,748 crores. The minimum required investment for lump sum investment route is INR 5,000, while it is INR 500 in case of Systematic Investment Planning method.
The expense ratio as of 31st May 2017 is 1.87 percent. For units which are over 15 percent of the investment, if investors redeem it within a period of one year or 365 days of holding it, then the exit load is 1%.
Chirag Setalvad has been the fund manager since April 2007. He is a B. Sc graduate and holds an MBA degree from the University of North Carolina. Before joining HDFC AMC, Setalvad worked for New Vernon Advisory Services Ltd. and ING Barings N.V. Some of the other funds that he has successfully managed, or is currently managing – HDFC Small Cap Fund; HDFC Children’s Gift Fund; HDFC Mid-Cap Opportunities Fund; HDFC Long Term Advantage Fund; HDFC Multiple Yield Fund ; and HDFC Retirement Savings Fund
Allocation of the fund
As of 31 May 2017, the fund’s allocation stands as 68.75 percent in equities, 24.12% in debt, 6.06% in Cash/Call, and 1.07% in mutual fund.
As of 31 May 2017, the top 6 sectors that the fund’s portfolio focuses on include Banking/Finance (21.45%), Engineering (6.27%), Oil & Gas (5.90%), Automotive (4.91%), Technology (4.61%), and Tobacco (4.02%).
As of 31 May 2017, the top 6 stocks that make up the fund portfolio include HDFC Bank (5.45%), Reliance Industries (3.48%), Larsen & Toubro (3.45%), ITC (3.30%), ICICI Bank (3.24%), and State Bank of India (2.73%).
As of Jun 30, 2017, HDFC Balanced Fund has produced a 15.61 percent per annum return on investment in the last 10-year period. The fund has beaten the category average of 10.75 percent for the same period. From the time of launch the fund has delivered 16.90 percent per annum returns.
In the past 1, 3, and 5 years, the fund has shown 21.53, 14.98, and 18.83 percent returns per annum. Thus the 3-year returns of the fund are over 2% points as compared to category returns. On a 5-year period, the out performance margins of the fund vis-à-vis the category is 3 percent.
If the topmost holdings are taken into consideration, then it can be said that the HDFC Balanced Fund heavily leans towards the banking and finance sector. As per data of the past 3 years, the fund’s standard deviation, i.e., the volatility of the returns of the fund vis-à-vis its average, is 10.72% as of 31st May 2017. This is slightly higher than the category average which is 10.04% for the same period.
When the returns of HDFC Balanced Fund are compared against its peers during the past 5 year period, then at 18.83 percent returns it has done as good as other similar funds like Birla Sun Life Balanced ’95 Fund (18.20%), ICICI Prudential Balanced Fund (19.38%), SBI Magnum Balanced Fund (19.00%), and Tata Balanced Fund – Regular Plan (17.90%). However, when looking at the fund’s returns from a 3-year perspective, then other funds in the category have marginally poorer returns than HDFC Balanced Fund returns of 14.98%.
HDFC Balanced Fund has consistently outperformed its category and benchmark for the past 7 years. Such consistency has ensured 4 to 5 stars for the fund for the past 5 years. The asset allocation maintained in the portfolio is usually steady and between debt and equity. The 69 to 72 percent allocation to equity is more than its category peers.
The fund’s focus is generally on purchase of decent-quality companies, with regards to ROE, growth forecast, business dynamics, and quality of management, at reasonable valuations. The equity and equity related part of the fund’s portfolio has a higher percentage of small and mid-caps as compared to its peers. The debt section of the portfolio mainly consists of investments in good-quality bonds with higher duration that can facilitate better yields from interest rate drops.
Over the past 5 years, the preference for small and mid-caps by the fund has helped it maintain steady performance. It may however be noted that the fund is not bound to mid-caps. Small and mid cap exposure of the portfolio used to make up over 50 percent of the equity section of the fund; but over the last 2 years, it has gone down to around 30%. The 5 and 3 year returns of the fund are evidence enough that it has comfortably beaten its benchmark by seven to thirteen percentage points.
The 10 year record of HDFC Balanced Fund can be compared to funds consisting of pure equity investments. The fund has been quite aggressive in its approach; but despite that it was able to better contain losses (as compared to its peers) during the market downturn of 2008 and 2011. The fund has also been able to produce good out performance margins during the last 1 year period when the markets were fraught with volatility and unpredictability.
Should I sell, buy, or hold?
HDFC Balanced Fund is a fund which offers high payoffs as compared to the risks involved. It has provided a solid and consistent performance for several years with big capital appreciation and market achievements. We give it our approval and our suggestion to all investors is – “Invest”
Excellent Fund Manager
Excellent Fund Size
Excellent Fund House
Excellent Performance Consistency
Low Expense Ratio