Skip to main content

HDFC Prudence

 

Balanced Funds, usually, fail to incite interest on the dalal street. The recent performance of HDFC Prudence, however, shows that you need not be reckless to rake in the moolah

 

IT IS a hybrid (balanced) fund. Yet, its returns, particularly in the recent past, have surpassed even those of the broader market indices – the Sensex and the Nifty. Launched in Jan '94, HDFC Prudence is one of the oldest equity-oriented hybrid funds of the country today. Its humungous asset size of over Rs 3,200 crore also makes it the largest and the most popular scheme in the category of balanced funds.

PERFORMANCE:

It is probably unfair to compare the performance of a hybrid fund with a core equity index. However, despite its blend of both debt and equity, HDFC Prudence has displayed a great ability to beat the equity market returns handsomely in its over a decade long performance history. Thus, despite being benchmarked to Crisil Balanced index, the fund's performance, so far, has inevitably raised its benchmark to an equity index like the Sensex or the Nifty. 

   HDFC Prudence has been successful in beating these indices uniformly year-onyear, since its launch, except in the most bullish years of 2006 & 2007. This indeed is surprising despite the fund's equity orientation towards mid- and small-cap stocks that had a ball in '06 & '07. The returns of about 33% and 43% in '06 and '07, respectively, may have disappointed any equity investor, for Sensex had returned about 47% in both the years and Nifty had given 40% and 55% returns, respectively. 

   But what really surprises is the fund's strong comeback in the current calendar year. Since January this year, the fund has delivered 82% returns, which is as good as the average of the category of diversified equity schemes. The Sensex and the Nifty have returned about 77% and 73%, respectively, during the period. 

   However, as far as the downturn of 2008 is concerned, despite outperforming the Sensex and the Nifty – given the balanced nature of the fund, it failed to beat the average returns of its balanced peers. The fund fell by about 42% in '08 against the average decline of about 41% by the category of balanced funds.

PORTFOLIO:

With about 75% of its assets invested in equity, the fund is extremely well-diversified and on average holds 55-60 stocks in the portfolio. And within the equity portfolio, the fund has a clear bias towards mid- and small-cap stocks that account for more than half of its equity portfolio. While the fund has been holding many of its stocks for over a couple of years now, churning the portfolio occasionally, some of its recent acquisitions have turned out to be multi-baggers. 

   Its recent picks like Lupin, Punj Lloyd, Simplex Infrastructure, CRISIL, Maharashtra Seamless and Biocon, during March – May '09 have more than doubled till date. As far as its long-term investments are concerned, it is benefiting mainly from the returns on some of the large-cap blue-chip companies it had picked early. These include stocks like SBI, Bank of Baroda, TCS, P&G, Glaxo Smithkline Consumer, Crompton Greaves and Sun Pharma among others. Initial investments in each of these stocks date back to early 2007 and even beyond. 

   At the same time, some of its long term mid- and small-cap acquisitions like ISMT, Indo Rama Synthetics, Uniphos Enterprises, Himatsingka Seide and Ahmednagar Forgings, among others, have fallen off grace since the time they were accumulated about two-and-half-years ago. 

   In terms of sectoral composition, financial services and pharmaceuticals have been dominating the fund's portfolio since 2008. In fact pharmaceutical sector, especially in the mid-cap space, has attracted attention of many fund mangers in the last few months. As far as the fund's debt compositions are concerned, the fund mostly invests in high rate papers especially those with AA+ or AAA ratings and in sovereign papers.

OUR VIEW:

HDFC Prudence's high midcap exposure definitely raises its risk quotient. However, the equity risk is well compensated by the exposure to high quality debt instruments. While the fund's performance in the current calendar year is breath-taking, it had a rickety performance a couple of years ago. Those seeking an investment opportunity in equities with 3-5 years' horizon can consider this fund.

 


Popular posts from this blog

Mutual Fund Exit Load Changes

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 Mutual Fund Exit Load Changes AMCs don't communicate about any change in exit load directly with investors, but do update on their website   The exit load applicable to your investments is the load which existed at the time when you invested in the particular fund. Any subsequent changes in the exit load will not be applicable to your investments.   However, Asset Management Companies ( AMCs ) periodically publish addendums in the newspapers, which state any change in exit loads of specific schemes managed by them. Such changes are also posted on their websites. However, a direct communication to an investor is not made, considering the costs involved in doing so. In their own interests, investors should not only track the performance of the funds they i...

Birla Sun Life Mutual Fund Launches Birla Sun Life NIFTY ETF

Birla Sun Life has launched a new fund namely, Birla Sun Life Nifty ETF, an open ended exchange traded fund. The new fund will be open for subscription from 4th July to 18th July 2011, at an offer price of Rs 10 per unit. The investment objective of the scheme is to generate returns that closely correspond to the total returns of securities as represented by S&P CNX Nifty, subject to tracking errors. No exit load will be charged under the scheme. The performance of the scheme will be benchmarked against S&P CNX Nifty and will be managed by Satyabrata Mohanty.   -----------------------------------------------------------------   Also, know how to buy mutual funds online:   1) DSP BlackRock Mutual Funds: http://prajnacapital.blogspot.com/2011/05/buying-dsp-blackrock-mutual-funds.html   2) Reliance Mutual Funds: http://prajnacapital.blogspot.com/2011/06/buying-reliance-mutual-funds-online.html   3) Birla Sunlife Mutual Funds: http://prajnacapital.blogspot.com/2011/...

Atal Pension Yojana contribution Tax Benefit for spouse

Contributions to Atal Pension Yojana (APY) are eligible for the same tax benefits as the NPS. This means that the contributions can be claimed under Section 80CCD (1B). The current limit for Section 80CCD (1B) is   Rs   50,000, over and above the   Rs   1.5 lakh limit under Section 80C. Section 80 CCD (1) is a different one, meant to cover employers' contribution towards NPS . You cannot get tax benefit by investing in the name of your spouse under Section 80 CCD . ------------------------------ ----------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saver Mutual Funds to invest in India for 2016 Best 10 ELSS Mutual Funds in India for 2016 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Religare Tax Plan 4. DSP BlackRock Tax Saver Fund 5. Franklin India TaxShield 6. ICICI Prudential Long Term Equity Fund 7. IDFC Tax Advantage (ELSS) Fund 8. Birla Sun Life Tax Relief 96 9. ...

Short-Term Investment Options in Mutual Funds

Mutual funds offer liquid funds and ultra short term funds in the debt category, which are suitable for short investment periods. Ultra short-term funds were earlier known as liquid plus funds. Liquid funds invest in money market instruments with a maturity of 91 days or less. However, there are no such restrictions for ultra short-term funds. Who should invest in these? These are open-ended schemes. Investors with a short investment horizon or with surplus cash and low risk appetite should look at these. These could include corporate as well as retail investors. Those interested in staying invested for less than 15 days can opt for liquid funds. Retail investors who want to remain invested for two-four months, can look at ultra short-term funds. The short duration for both liquid and ultra short-term funds shields them from any interest rate volatility.   What kind of returns do they offer? In terms of an investment period less than 15 days, these funds are comparable to a ba...

Mutual Fund Reivew: Birla Sun Life Asset Allocation Conservative

Birla Sun Life Asset Allocation Conservative has numbers on its side to prove its credibility… Don't be surprised to find this Fund of Funds ( FoF ) in our recommendations. It has earned its place. And despite the difference in the structure of the product, there is no arguing with the numbers.   Of the total 6 years of its existence, the fund has been among the top 10 funds in its category in four of them. Last year it put up an average show and the only year it underperformed its peers was in 2008.   One aspect to look at when investing in an FoF is the expense ratio. The expense ratio of an FoF is capped at a lower limit of 0.75 per cent (2.50% for an actively managed fund). However, the FoF not only has its own expense (though lower) but even the expense ratio of the fund it is investing into. Fortunately, the fund manager takes that into account. "Expense is one of the important criteria used for fund selection and is the main reason for our investment in BSL Ind...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now