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Balanced funds are equity-oriented hybrid funds having a mix of equity and debt in their investment portfolio. In terms of performance, they generally lag diversified equity funds during the equity market rallies. Nevertheless, a well-managed balanced fund can add significant value to the investors' portfolio, by limiting the downside risk during bearish market phases. These funds are suitable for investors with a moderate risk profile, since they benefit from timely asset allocation, by being invested in a single avenue. Moreover balanced funds have the ability to create wealth for their investors over longer time frames.
Principal Conservative Growth Fund (PCGF) is one such open ended balanced scheme from the stable of Principal Mutual Fund. Launched in January 1998, the fund has completed over 13 years of existence now. The Fund has an objective "to provide long term capital appreciation and regular income by investing in equity and equity related instruments and also in debt and money market instruments."
How PCGF has fared vis-à-vis its peers
(NAV data is as on September 8, 2011. Standard Deviation and Sharpe ratio is calculated over 3-Yr period. Risk-free rate is assumed to be 6.37%)
Chart above depicts that Principal Conservative Growth Fund has been a market performer over 5 year time horizon however in the recent past; it has grossly underperformed not only the competition but also the benchmark.
So far PCGF has not indulged in aggressive churning and has followed a buy and hold portfolio strategy. Being an equity oriented balanced fund, it holds 68% of its assets in equities and 32% in debt and cash as on July 31, 2011. Its debt component is comprised of debt instruments enjoying high credit rating while its equity holdings are predominantly in mid and small caps. Top 10 stocks constitute 32.1% of the total corpus as on July 31, 2011.
Fund Manager Profile
| Name of the Fund Manager | Mr. P.V.K.Mohan (Equity) | Mr. Shobit Gupta (Fixed Income) |
| Total Work Experience | 16 years | 13 years |
| Managing the fund since | May-10 | May-10 |
| Qualifications | B.Tech PGDM | PGDBA/CFA |
PCGF has exposed its investors to a higher volatility and despite its mid cap dominated portfolio, it appears that PCGF has missed an exuberant rally in the mid cap space, in the past couple of years. It has completely failed to accelerate on the returns front. This makes it a high risk-low return investment preposition.
PCGF has been around for more than a decade now and has been managed by an experienced team. Despite of that it has failed to reward even the long term investors on the risk adjusted basis. We believe that conservative investors would be better-off investing in funds which have a proven track record across the market cycles. You should always take an expert opinion before investing, as holding merely funds for the longer duration wouldn't ensure better returns but better fund management coupled with patients surely does
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Some of the Top performing Mutual Funds are
- HDFC Top 200 Fund
- ICICI Prudential Dynamic Plan
- DSP BlackRock Top 100 Fund
- Birla Sun Life Front Line Equity Fund
- Reliance Equity Opportunities Fund
- IDFC Premier Equity Fund
- SBI Magnum Contra Fund
- Sundaram Select Midcap
- UTI Dividend Yield Fund
