Canara Robeco Balance: Invest

Investors with limited risk appetite but willing to hold equities can consider phased exposures to equity-oriented balanced fund Canara Robeco Balance. The fund's three-year return of 19 per cent compounded annually is superior to the average return of balanced funds and its benchmark Crisil Balanced Index. It also matches the performance of pure equity funds over this period.

Its strategy is to limit risks in equities by focussing on large-cap stocks. The fund's active strategy in debt, which accounts for a third of assets, has been the key to managing volatility in the last three volatile years.

Suitability

The market volatility in 2011 could have reduced your risk appetite for equities. But the knockouts may well provide opportunities for long-term equity investors, especially in quality blue chips. 2012 may also see some kicker returns from debt, if interest rates do fall, triggering a rally in bonds.

You will get a combination of the above two in Canara Robeco Balance.

Being conservative, though, not only means mitigating downside risks but also capping returns in a rally. Canara Robeco Balance substantially underperformed peers such as HDFC Prudence in years such as 2009. Unlike many of its peers, Canara Robeco limits its exposure to mid-cap stocks, thus capping returns in a rally. The fund is, therefore, not suitable for investors with high-return expectations.

Performance

The fund managed to contain declines to 8.7 per cent in 2011, compared with the 25 per cent fall in Sensex. Its benchmark Crisil Balanced index fell 14 per cent over the same period while peers such as HDFC Prudence saw their NAV fall 16 per cent.

The fund's consistency in performance is evident when one looks at the rolling returns over the last three years. It beat its benchmark 85 per cent of the times over this period.

The fund has been timing its equity calls well in 2011. This is true in case of exits such as GlaxoSmithKline Pharmaceuticals or phased out purchases in the stock of UltraTech Cement.

Banks remain the fund's most favoured sector. The fund, however, has been constantly tweaking its holdings within the sector.

Its debt strategy has been equally active. The fund has steadily increased exposure to bonds from institutions such as ICICI Bank and HDFC, to 19 per cent of its assets now. A decline in interest rates can provide capital appreciation opportunities, especially in medium- and long-term bonds.

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