DSPBR Balanced -- Deft juggling of debt and equity

With markets trending higher and some funds moving into cash at this juncture, investors with a modest risk appetite can opt for equity-oriented balanced funds. The equity portion of the portfolio can help rake in returns, while investments in debt can cap losses, if markets lose steam.

DSP BlackRock Balance Fund, with 65-75 per cent equity allocation and 25-35 per cent in debt, has a good track record of delivering category beating returns. Across all time-frames, over one, three and five years, the fund has managed to outperform its benchmark — Crisil Balanced Fund Aggressive. Over one and three years it is positioned in the top quartile of its category.

The fund has been able to contribute well during market rallies. For instance, in the 2014 bull market, the fund clocked 45 per cent returns, outperforming the category average of 40.8 per cent. In the not-so-spectacular 2016 market too, the fund managed to outperform the category by 2 percentage points.

The fund has delivered better returns compared with HDFC Prudence and Birla Sun Life Balanced 95 over a three-year period. Investors can invest through the SIP route to ward off volatility.

Following a lacklustre performance in 2012 and 2013, the fund managed to improve its track record significantly. It has delivered returns of 27 per cent and 21 per cent, respectively, over one and three years, beating the corresponding category average returns of 20 per cent and 18 per cent. No doubt, a strong market rally over the past few years has helped the fund better its performance. But investing a sizeable portion of its equity in mid- and small-cap stocks — that have been on a stellar run — has also spiced up the fund’s returns.

DSPBR Balanced invests about 15 per cent (of its equity portfolio) in mid-cap stocks and 20 per cent in small and micro-caps. In early 2014, the fund also made a timely shift from software to banking stocks. Since then, banking has been the top preferred sector and has delivered steady returns. The fund began upping its allocation in consumer non-durableslast May and stocks such as ITC and Crompton Greaves Consumer Electricals have delivered good returns. Auto ancillaries and ferrous metal stocks have also been added to the portfolio over the last one year. The fund has about 60 stocks in its portfolio. Allocation to individual stocks, barring a few, is less than 4 per cent, which defuses the risk.

On the debt side, DSPBR Balanced invests mainly in ‘AAA’ rated instruments. 63 per cent of debt allocation is towards bonds and NCDs and 22 per cent in Government Securities. The fund holds NCDs of institutions such Power Finance Corp, Reliance Gas Transportation and Bajaj Finance.

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