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

The Economic Times - - Companies -

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.

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