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Equity-heavy balanced funds slump - Views on News from Equitymaster
 
 
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  • Jun 29, 2000

    Equity-heavy balanced funds slump

    This has been a disappointing week for investors in balanced funds, with most funds recording negative gains over the week.

    Equity markets have witnessed lackluster trading for most of the week with no trend emerging. This saw the BSE Sensex decline by about 0.9% over the week. This had a depressing effect on equity (growth) funds, which is not surprising. However, even balanced funds did not escape unscathed with all balanced funds except two in negative territory over the last week. In fact while the BSE Sensex fell only 0.9%, most balanced funds fell by much more than that.

    Open-ended, BalancedSchemes NAV
    (Rs)
    Last
    week
    Last
    month
    Last
    months
    Since
    inception
    Dhanasahayog C (Gr) 18.69 2.20% 12.10% -15.50% 4.40%
    Dhanaraksha 1989 10.14 0.90% 5.30% 5.90% 4.60%
    PNB Balanced Growth 14.32 -0.10% 6.00% 0.00% 35.50%
    Dhanavidya 12.03 -1.60% 9.80% -22.20% 2.10%
    Canpremium 12.31 -2.50% 14.30% 18.10% 17.50%
    Tata Young Citizens 11.38 -3.00% 11.00% 35.60% 21.00%
    K Balance 10.84 -3.00% 11.30% 0.00% 9.90%
    Sun F&C Balanced (Gr) 8.98 -3.20% 10.60% 0.00% -15.30%
    Zurich(I) Prudence (Gr) 20.12 -3.30% 7.70% 33.30% 17.80%
    Dundee Balanced Fund (App) 8.86 -3.40% 13.60% 0.00% 1.00%
    Dhanavikas (1) 9.01 -3.60% 16.60% -4.50% -1.30%
    Birla Balance (Gr) 12.33 -3.70% 15.30% 0.00% 31.40%
    JM Balanced Fund (Gr) 17.21 -3.70% 14.60% 30.50% 11.60%
    Canganga 11.78 -4.20% 17.10% 14.10% 4.60%
    Tata Balanced 16.02 -4.60% 18.90% 52.90% 18.10%
    DSP ML Balanced (Gr) 11.41 -4.90% 11.10% 13.20% 13.70%

    (The above table is not comprehensive and only shows balanced funds that have fallen by up to 5% in the last week)

    As the table indicates, most balanced funds have under-performed the BSE Sensex in the last week. With the Sensex falling by 0.9%, only three balanced funds (Dhanasahayog C, Dhanaraksha, ING Balanced Growth) fell by less than that, with all other funds falling by over 0.9%.

    The rationale for investing in a balanced fund is to have a debt cushion in case of a fall in equity markets. But with balanced funds taking large exposures to equity instruments, this cushion has been conspicuous by its absence, which is more than evident in the returns.

    Investors need to look at the asset allocations of balanced funds more closely. A 60:40 (equity-debt) combination is considered ideal by most fund managers. In a lackluster market like the one at present, any deviation towards equity could be asking for trouble.

     

     

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