Another fund with a 17 year track record, DSP BlackRock Balanced Fund has delivered an impressive 13.7 per cent return per annum over the past 10 years.
The DSPBR Balanced Fund is managed with the core philosophy of long-term wealth creation and income distribution. The crucial aspect of this philosophy is to achieve these goals in a consistent manner while assuming risks to prudent and controllable levels. The Fund is mandated to invest in equities from 65 per cent to maximum of 75 per cent and the rest in debt. Where equity proportion is managed in a diversified style to generate returns over the long-term, the debt part helps in cushioning the volatility in equity market. While they don't believe in timing the markets and stay invested in equity of good quality and growing companies, this proportion is balanced frequently to benefit from the market volatility. On the debt side, the fund endeavors to deliver stable fixed income returns through coupons and capital appreciation. The fund invests in a mix of strong corporate credits and securities.
On the equity side of the fund, as already mentioned above, they don't believe in timing the markets and stay invested in equity of good quality and growing companies. Hence equity portion of DSPBR Balanced Fund would stay invested on the higher side i.e. around 72-74 per cent most of the time. Secondly, to help achieve the goal of long-term wealth creation, the equity portion would have a large-cap to midcap exposure in ratio of around 60 to 35.
Though the fund will be managed with a bottom-up approach, pre-dominant style would be to buy and hold companies with compounding growth in revenues and in earnings run by good, competent managements. Limited part of the portfolio would be exposed to value or turnaround names depending on conviction levels about them. At the same , the endeavor is to avoid apparent value picks or companies making severe capital allocation mistakes. Both the aspects means the fund can deviate from the broad market indices by a considerable degree. On the Debt side, the fund will maintain a medium term duration strategy. The fund will look to invest in the liquid segments of the curve.
For the equity portfolio, risks can be managed at two levels, at overall portfolio level and at individual stock level. At the portfolio level, the risk is managed by better diversification across sectors and stocks. DSPBR Balanced Fund intends to limit top 5/10 stock weight to the extent of roughly 20/30 per cent respectively. Secondly, to benefit from any particular sector or theme also, the Fund desires to create a basket of companies to spread the bets. At individual company level, they believe if one has invested in a good quality company with competent management and with long-term view, risks get reduced substantially. As far as fixed income is concerned, the mix of strong focus and government securities selection provides adequate liquidity while maintaining attractive yields.
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