Reliance Regular Savings Balanced Fund can prove to be a good bet for risk-averse investors seeking an investment opportunity in equities
IN THE backdrop of a sharp volatility in the Indian stock market, balanced funds offer a safer way of investing. Launched in May 2005, Reliance Regular Savings Balanced Fund is an equity-oriented hybrid fund. Though its start was rickety, the fund's performance now seems to attract a large number of investors. The fund's asset base has seen a surge from just over Rs 20 crore to nearly Rs 700 crore in two years.
PERFORMANCE:
Reliance Regular Savings Balanced Fund failed to demonstrate a superior performance in the initial few years of its inception. However, in the past three years, it has outperformed the market thereby establishing itself as a strong contender among its peers. It has not only delivered more than average returns during the market run-ups, but also displayed resilience during the market crash.
For instance, in 2008, the fund cushioned its fall to about 36% against the market fall of 52%. The category average had tumbled by about 41% that year. In 2009, the fund delivered 75% returns, in line with the gains in the Sensex and the Nifty. In the current financial year too, Reliance Regular Savings Balanced Fund has generated better returns than the major market indices proving its potential. This scheme debuted the ET quarterly MF rating with the lowest grading "lead" in 2007. However, it swiftly moved up and occupied the highest platinum cadre in just about a year and has been holding the position ever since.
PORTFOLIO:
Being equity-oriented hybrid scheme, Reliance Regular Savings Balanced Fund has a leeway to go up to 75% in equity. However, it has not really touched that limit. On the debt side, the fund has largely had cash and call money. However, since February 2010 the fund has taken an exposure in debt paper like certificate of deposit (CD) and commercial papers (CP).
Historically, the fund had a condensed portfolio of less than 20 stocks within the equity portfolio, which is now diversified to 30 stocks limiting the exposure in a particular stock to just about 5%. The fund has also been increasing its exposure to large cap stocks.
The sector composition of the fund underwent some significant changes in October 2007, when fund managers Omprakash Kukian and Arpit Malviya took over the reins. The engineering sector was introduced in the portfolio while exposure was lowered to construction and technology. Currently, the fund's position in financial and services sector is rising.
However, fund manager frequently churns the portfolio, hence making it difficult to ascertain sectors, which have predominately led the fund. A similar trend is seen in stocks; it's not unusual to see the fund enter a stock in
one month and exit it completely in no time. As far as long-term investments are concerned, the fund doesn't have even one stock that has been held for a year. The portfolio turnover ratio of this fund is 2.53 times depicting average holding period being not more than 3-4 months. However, Mr Kukian feels that needless churning does not take place. It is mainly done to generate alpha or better returns over the underlying benchmark, as the size of the fund is reasonable.
OUR VIEW:
Equity-oriented hybrid funds could be a sensible choice for those who are reluctant to play their bet on either equities or bonds, witnessing current volatility in each asset class. Given the fund's superior performance in the past three years and selection of portfolio sectors, Reliance Regular Savings Balanced Fund may prove to be a good bet for a risk-averse individual seeking an investment opportunity in equities with a time period of 3-5 years.
