In an environment where broader market valuations are elevated and uncertainty on corporate earnings continues, financial planners believe investors looking for an exposure to equities would do well to opt for balanced funds. Balanced funds typically have two thirds of their portfolio in equities and the rest in fixed-income securities, which helps an investor maintain asset allocation. HDFC Balanced Fund, managed by Chirag Setalvad for the past decade, has been a consistent and steady performer, giving an annualised return of 15.59 per cent.
The fund maintains its equity allocation between 67-72 per cent and avoids taking any cash calls. The equity portion of the fund is dynamically managed with the fund manager increasing valuations to midcap stocks when valuations are appealing. For example, in 2014, when midcap valuations were low, the fund increased exposure to the segment to 25 per cent of the portfolio. As valuations soared, midcap exposure was pruned with the fund exiting stocks like Century Plyboard, Supreme Industries and Cadilla Healthcare, and increasing allocation to large cap names, such as HDFC Ltd, HDFC Bank, HPCL and Reliance Industries. The debt portion is conservatively managed with exposure to government securities and high quality AA or AAA rated corporate paper.
The fund has been one of the best performers in its category beating its benchmark consistently over 1, 3, 5 and 10-year periods. Over the past year, the fund returned an annualized 15.05 per cent.
