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Balanced funds come out trumps - Views on News from Equitymaster
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  • Jan 1, 2001

    Balanced funds come out trumps

    Equity markets witnessed some harrowing times this year. This took a toll on growth funds. Investors would have been better off investing in balanced funds, which escaped the brunt of the market slide, thanks to a fixed income hedge.

    It took just one bearish rally in March to kill the TMT (technology, media, telecom) euphoria of 1999. After that it was mostly downhill for these stocks with the exception of some very brief rallies.

    Open-ended, Growth†Funds NAV (Rs) 1-week 1-month 12-months *CAGR
    Since incep
    BSE - 30 - 1.7% -0.6% -26.0% -
    S&P CNX Nifty - 1.7% -0.1% -17.4% -
    S&P CNX 500 - 2.4% -1.3% -32.0% -
    Discovery Stock Fund 6.6 4.1% -4.5% 6.4% -6.3%
    Templeton Growth Fund 12.3 3.0% 2.4% -2.3% 7.7%
    Tata Pure Equity 11.7 -4.9% -7.5% -10.6% 41.1%
    K P Bluechip (Gr) 22.4 3.0% -1.5% -13.2% 27.8%
    Zurich(I) Capital Builder 10.2 0.2% 4.3% -17.0% 3.5%
    Alliance Equity Fund (Gr) 32.4 -5.5% -10.1% -17.5% 64.0%
    Libra Leap 17.0 6.5% -4.7% -18.3% 25.0%
    Reliance Vision Fund 17.8 -2.8% -1.2% -19.6% 11.3%
    Zurich(I) Equity (Gr) 18.3 -2.7% -3.2% -20.3% 11.7%
    UGS 10000 11.3 -0.1% 4.0% -21.0% 6.1%

    *Compounded Annual Growth Rate

    However, while growth funds saw some disturbing times this year, balanced funds put in a more creditable performance. Although, a lot of balanced funds were also guilty of posing as quasi growth funds with significant TMT exposure, in the end their fixed income exposure spared them the blues. But even balanced funds witnessed some volatile times in July-August when the RBI raised rates. However, these funds have picked up smartly since.

    Open-ended, Balanced†Funds NAV (Rs) 1-week 1-month 12-months * CAGR
    Since incep
    BSE - 30 - 1.7% -0.6% -26.0% -
    S&P CNX Nifty - 1.7% -0.1% -17.4% -
    S&P CNX 500 - 2.4% -1.3% -32.0% -
    Unit Scheme-1995 (Gr) 185.7 -3.4% -2.3% 25.2% 20.8%
    K P Pension Plan (Gr) 16.5 0.0% -1.1% 10.0% 14.2%
    PNB Balanced Growth 12.3 -6.3% -4.8% 8.7% 13.4%
    Canpremium 11.6 -3.7% -2.8% 6.7% 15.1%
    Dhanaraksha 1989 10.2 0.3% 2.6% -2.2% 4.2%
    Zurich(I) Prudence (Gr) 19.6 -0.6% -1.1% -9.3% 15.9%
    Alliance 1995 Fund (Gr) 49.9 -4.2% -7.3% -11.0% 33.4%
    K Balance 9.6 1.6% -2.9% -12.5% -1.7%
    Tata Young Citizens 10.1 -2.2% -3.4% -12.7% 15.9%
    Tata Balanced 13.8 -3.2% -5.3% -16.7% 12.7%

    *Compounded Annual Growth Rate

    The bottomline is most diversified growth funds, were anything but diversified. In a year, when no particular sector dominated the scene, funds that took undue exposure to a single sector, particularly software, paid the price, particularly those funds which entered software before February 2000 at exorbitant rates. A smart turnaround in old economy stocks towards the end of the year taught fund managers a very important lesson Ė old economy isnít ready to be written off just as yet, even if a lot of dotcoms are.



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