Investors can buy the units of Tata Balanced Fund, given its long-term track record in delivering steady returns. The scheme delivered 22.5 per cent returns compounded annually over a ten-year period, which beats peers such as Birla Sun Life 95, DSPBR Balanced and HDFC Balanced. The fund is the best performer in the (equity-oriented) balanced funds category in the last ten years, after HDFC Prudence.
Tata Balanced has managed a 10.9 per cent return over a five-year period. This matches the returns posted by even seasoned diversified equity funds. The fund is hence a suitable alternative to pure equity funds, for those looking for some respite from the volatility in equity markets.
Performance and Strategy
The fund participates well in market rallies with timely increase in its equity exposures. From about 65 per cent levels in the second half of 2008, it increased its equity holdings to 70-75 per cent beginning January 2009. This came in handy in the upswing that followed the March 2009 lows. The fund returned 26 percentage points more than its benchmark, Crisil Balanced, that year. More recently, the fund was able to ride on the mid-cap rally in 2012, thanks to about 40 per cent exposure to mid-cap stocks (less than Rs 7,500 crore market capitalisation) in its equity portfolio during the year. In 2012, the fund gained 9.5 percentage points over its benchmark. However, due to its bias towards mid-cap stocks, the fund trailed the benchmark during the 2008 fall. But it has learnt its lessons. When markets fell in 2011, it was quick to find safety in large-caps. This, coupled with heightened exposures to corporate debentures which offered attractive yields at that point in time, helped it contain losses better than the benchmark.
The fund’s preference for mid-cap stocks may peg up the risk when compared with some other balanced funds. But its ability to make a timely shift to large-caps as seen in 2011, offers comfort. A second factor in its favour is the fund’s ability to pick sound stocks in the mid-cap space and periodically book profits in a rally — examples from the last one year being companies such as FAG Bearings, NIIT Technologies, Balkrishna Industries and IPCA Labs. Third, the fund plays very safe on its debt portfolio, investing predominantly in AAA or AA rated non-convertible debentures, government securities and certificate of deposits.
Portfolio
The fund currently holds about 71.5 per cent in equities, with banks being the top sectoral bet, followed by defensives such as consumer durables and pharma. Thanks to the slowdown in manufacturing and industrial production, exposures to automobiles and industrial products have been cut down gradually in the last one year.
Investments in debt instruments include NCDs of Rural Electrification Corporation, L&T Finance and National Housing Bank.