HDFC Children’s Gift: Buy. Plan a top-notch gift

Looking for a fund that can be a part of your core portfolio, to help you reach a long-term goal?

Consider HDFC Children’s Gift – Investment Plan, an equity-oriented balanced fund that has topped the charts time and again. You could choose to make your child the beneficiary and lock in investments until he or she turns 18 or for three years, whichever is later.

Even if you don’t opt for locking in your investment, the fund imposes stiff penalties of 3 per cent to 1 per cent exit load on withdrawals progressively.

The scheme is therefore suitable for a long-term goal, such as your child’s education.

That the fund sports a strong performance record across market cycles adds to its suitability. The fund puts around 70-74 per cent into equities with the remaining is held in cash and debt.

For the longer periods of three and five years, the HDFC Children’s Gift fund sits comfortably at the top of the charts, beating the category average by a margin of three to six percentage points. In the one-year period, though, the fund has only marginally been ahead of its category.

In the recent heady run in the markets, marked by dozens of stocks clocking multi-fold gains, the fund somewhat lagged in momentum. Compared with peers such as Tata Balanced and L&T India Prudence, the HDFC fund picked fewer multi-baggers. This is in part due to the fund’s strategy of ‘buy and hold’ and keeping portfolio churn low.

In the past year, for instance, the fund added just five new stocks to its portfolio while exiting two.

The fund has been maintaining roughly a 72:28 ratio in equity and debt over the past five years. It takes some risks in its equity portfolio, putting around a third of it into mid-cap stocks (those with market cap of less than ₹10,000 crore). Several mid-cap picks such as SKF India, Amara Raja Batteries, FAG Bearings and Motherson Sumi have yielded strong gains.

Exposure to banking has been increased since early 2014, while that to software and pharmaceuticals has been cut sharply.

In its debt portfolio too, the fund has moved sometimes into higher-risk AA-rated debt. Given the good yields in corporate debt in 2012 and 2013, the fund increased exposure here.

Of late, this has been reduced in favour of government securities and longer-term debt. The debt portion’s current yield-to-maturity is a good 7.9 per cent while the average portfolio maturity is 12 years.

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