HDFC Prudence Fund, launched on February 1, 1994, is one of the oldest funds in the equity-oriented hybrid funds category (also called as balanced funds). As of July, the fund's average assets under management (AUM) were `4,558 crore.
It has been ranked 'Crisil Mutual Fund Rank 1' for the past three quarters and has held the top rank on 22 occasions over the 10-year history of Crisil Mutual Fund Ranking. The high consistency in rankings is an indication of a blend of superior performance and disciplined portfolio management.
Investment style
It seeks to benefit from both asset classes, ie, it aims to provide capital appreciation of equities and stability of debt market instruments. During the last three years, the fund maintained an average 75 per cent exposure to equities. It's aggressively managed, showing a clear tilt towards equities over the last three years wherein the fund remained invested largely in equities, despite 2008's down cycle.
Performance
The fund has capitalised on equity market gains and outperformed the benchmark index (Crisil Balanced Fund Index) with a sizeable margin. It has generated nearly twice the benchmark index returns for various periods analysed (three months to five years) — much higher than its peers. During the downturn of 2008, the fund lost 43 per cent of its net asset value (NAV) from January 2008 (market peak) till March 2009, compared to 34 per cent of the Crisil Balanced Fund Index and 51 per cent of the S&P CNX Nifty. The fund's performance vis-à-vis its peers clearly stands out during the market recovery phase after March 2009. Till date, the fund's NAV multiplied 2.5 times (122 per cent gain) from its lowest point in March 2009, while the benchmark index returned 52 per cent and the S&P CNX Nifty gained 77 per cent.
Portfolio analysis
Within equities, the fund maintains a fairly diversified portfolio exposure across market capitalisation with a bias towards large-cap stocks. The average fund exposure to stocks in the BSE 100 and CNX Midcap index during the last two years is around 43 per cent and 18 per cent of the total portfolio.
The average number of stocks in the portfolio for the last two years is 61, indicating good stock-wise diversification. Within the debt portfolio, the fund has maintained good asset quality with a predominant exposure (21 per cent) to government securities and AAA/P1+ rated papers over the last two years.
Sector trends
Banks, pharmaceuticals and financial institutions have been the most preferred sectors in the fund's portfolio over the last three years, with exposure to these sectors being over a fourth of total assets. Banks, housing finance and consumer goods sectors were the largest contributors to total gains of the fund during the last two years.