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Balanced Schemes caught off-balance - Views on News from Equitymaster
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  • May 22, 2000

    Balanced Schemes caught off-balance

    The fall in net asset values (NAVs) of growth and tech-heavy schemes can be attributed to the recent meltdown in the markets. However, Balanced schemes seem to have aped the performances of their Growth counterparts lending credence to the view that fund managers have been guilty of poor diversification.

    The table below highlights the performance of Balanced Schemes. With the exception of a handful, all Balanced schemes have given negative returns over the last month.
    Open-ended Balanced Schemes NAV (Rs) Last week Last month Last year Since inception
    Unit Scheme - 1995 (Gr) 193.3 -1.5% 1.9% 79.3% 24.6%
    Canpremium 11.1 -4.7% 1.4% 8.0% 12.9%
    PNB Balanced Growth Fund 14.0 -1.8% 0.1% 0.0% 32.1%
    Unit Scheme - 1995 (Inc) 170.2 -1.6% -0.2% 71.4% 23.5%
    Zurich India Prudence (Gr) 18.8 -1.5% -5.3% 28.8% 16.8%
    Dundee Balanced Fund (App) 8.2 -2.7% -7.4% 0.0% -6.5%
    DSP ML Balanced (Growth) 10.7 -1.0% -8.4% 0.0% 7.2%
    Tata Young Citizens Fund 10.6 -4.4% -9.2% 28.1% 19.7%
    K Balance 10.0 -2.2% -9.8% 0.0% 1.5%
    Kothari Pioneer Balanced (Gr) 8.9 -0.7% -10.0% 0.0% -16.8%
    Birla Balance (Growth) 11.6 -1.9% -11.4% 0.0% 23.3%
    Alliance 1995 Fund (Gr) 54.2 -2.3% -11.9% 82.3% 41.5%
    Tata Balanced Fund 14.4 -6.7% -12.9% 37.8% 15.6%
    Canganga 10.5 -5.8% -13.2% 3.7% 2.3%
    Dhanavikas (1) 8.0 -5.4% -13.9% -11.3% -3.0%
    Sun F&C Balanced Fund (Growth) 8.3 -4.5% -14.6% 0.0% -21.3%
    JM Balanced Fund (Gr) 15.9 -6.5% -14.8% 21.6% 10.1%
    Cantriple 18.7 -5.4% -15.2% 8.2% 5.0%

    While negative returns in itself is not such a bad thing, what must be considered is that these Balanced schemes have performed more or less in line with Growth schemes over 1 month (see table below), which is definitely a bad thing. Because there are a lot of investors, who chose Balanced schemes over Growth schemes, believing them to be safer.

    Open-ended Growth Schemes NAV(Rs) 1-week 1-month 12-months Since incep
    Magnum Sector Funds - Contra 8.2 -3.2% -4.2% 0.0% -18.8%
    Templeton Growth Fund 12.3 1.9% -5.4% 50.5% 9.2%
    Zurich India Quantum Growth 11.8 -0.8% -6.4% 0.0% 3.7%
    GIC D'MAT 8.2 -2.6% -7.6% 0.0% -28.7%
    Alliance Basic Ind. Fund (Gr) 8.0 -3.0% -7.7% 0.0% -10.1%
    Mastershare Plus 1991 20.7 -2.7% -9.0% -5.9% 4.4%
    Mastergain 1992 10.8 -2.2% -9.1% -2.7% 2.7%
    UGS 10000 11.3 -4.8% -9.7% -6.0% 8.9%
    GIC Fortune 1994 6.18 -3.0% -10.2% -3.7% -7.8%
    Kothari Pioneer Bluechip (Gr) 22.4 0.8% -10.5% 65.1% 30.9%
    Birla MNC Fund (Growth) 29.3 -1.3% -11.1% 93.6% 21.3%
    Zurich India Equity (Gr) 20.0 -2.7% -11.1% 57.4% 15.0%
    UTI Sector Fund - Service Sector 28.4 -13.0% -11.9% 0.0% 15.2%
    Zurich India Top 200 15.5 -2.1% -13.0% 7.4% 185.2%
    Reliance Vision Fund 18.9 -5.7% -13.1% 29.0% 9.9%
    Kothari Pioneer Prima Plus (Gr) 23.3 -0.6% -13.4% 64.4% 19.2%
    K 30 19.0 -2.8% -14.5% 53.7% 18.4%
    GIC Growth Plus II 17.04 -3.5% -15.5% 84.8% 18.4%
    Tata Pure Equity Fund 12.5 -10.1% -15.7% 59.4% 54.2%
    Birla Advantage Fund 41.1 -4.6% -16.1% 103.1% 10.7%
    Boinanza Exclusive Growth 6.52 -9.7% -16.2% -10.4% 38.0%
    Sun F & C Value Fund (Gr) 21.2 -6.7% -16.8% 27.7% 11.6%
    Sundaram Growth Fund 13.4 -6.3% -16.9% 33.6% -5.7%
    Mastergrowth Unit Scheme 1993 16.1 -9.2% -17.1% 1.7% 34.9%
    Canbonus 9.4 -6.1% -17.1% -13.4% 24.2%

    So are Balanced schemes really safe? Well, they could have been a lot more safe, if funds had cut down exposure to TMT (technology, media telecom) stocks and increased exposure to fixed income instruments (gilts, money market instruments) to lend some stability to their portfolios. While a 70:30, 65:35 ratio (in favour of equities) works fine in a rising market, maybe a 60:40, 55:45 ratio is more prudent in times of volatility. So investors looking for stability in the Balanced schemes must look for higher allocations to fixed income securities and lower allocations to TMT sectors.



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