Balanced Funds Earn More For You Than Large-Cap Peers
Star fund manager says early mornings are his most productive as he gets his best ideas then
Mumbai: Investors would have made more money in mutual fund schemes that invest in a mix of stocksanddebtratherthanproducts betting only on blue chips in the last 10 years. Equity-oriented balanced funds, which invest 65% of their corpus in equities and the balance in debt instruments, have outperformed large-cap funds in periods of one, three, five and 10 years.
In the last three years, balanced funds have returned 15.65%, while large-cap schemes have fetched 13.13%. For the five-year period, returns from balanced funds were 9.75% against 6.7% from large-cap funds. The category has returned 9.7% in the last 10 years against What’s the most productive time of your day? Early morning, when everyone else is asleep. That’s when I come up with my best ideas
What’s on your smartphone home screen? My calendar and WhatsApp, which I use a lot
What’s your workday time waster? Intellectual discussions that lead nowhere
What do you look for in fresh
hires? Enthusiasm, positive
CMP: 8.46% by large-cap funds, data from mutual fund t r a c ke r Val u e Research show.
Equity-oriented balanced funds maintain their equity allocation between 65% and 75%. So when the markets go up, the equity allocation increases and the fund man-
CMP: What’s annoys you the most at work? People who think everything is about them
What’s your leisure activity of choice? Listening to music, occasionally singing
What was your favorite subject in school? Physics
What’s the best professional advice you’ve received? “Get people who will put the team above themselves”
Travelling back in time, what advice would you give your 30-year-old self? Don’t over-intellectualise things and postpone action ager is forced to trim it. “These funds automatically sell highs and buys lows,” says Pradeep Gokhale, senior fund manager, Tata Mutual Fund. Large-cap funds remain invested in equities only, and, hence, have underperformed.
Some believe the debt component has enabled these funds to outperform. “The debt component consistently delivered 9-10%, while equities lagged behind, which helped their outperformance,” says Rupesh Bhansali, head (distribution), GEPL Capital.
As a result, balanced funds fell less than large-cap schemes in the past year. Balanced funds have lost 3.82% in the past year, while largecap funds have lost 10.84%.
As per distributors, high volatility in equities is driving retail inves-
CMP: What’s your favourite global holiday destination? The Alps, in Switzerland, Austria and France What’s your favourite Indian holiday destination? Auli in Uttarakhand
Would you rather spend an evening with Katrina Kaif or Mukesh Ambani? Mukesh Ambani
tors to balanced funds. Data from AMFI show balanced funds have seen an inflow of ₹ 19,665 crore during the financial year compared to ₹ 8,335 crore in the previous financial year. The assets under management (AUM) of bal-
anced funds have surged to ₹ 39,104 crore compared with ₹ 26,507 crore a year back.
Bhansali recommends investors look at funds like L&T India Prudence Fund, SBI Magnum Balanced and Tata Balanced fund, for a time frame of three years and above.
With valuations high and earnings taking time to recover, wealth managers are recommending firsttime investors to invest through balanced funds.
The Nifty is trading at a PE of 20.73, while the Nifty Midcap 150 trades at a PE of 27.09. Balanced funds have a lower volatility than plain vanilla equity mutual funds because of their exposure to debt.
Gokhale also believes tax benefits are another reason for increased flows into balanced funds. Post the new tax rules for debt funds, investors in the high tax bracket are putting money in this category as these funds are treated as equity funds from a tax perspective.