Is it Wise to Invest in the Newly Formed HDFC Balanced Advantage Fund?
Posted by Dishika Baheti on September 26th, 2018
HDFC Prudence Fund, which was earlier a balanced fund, has been merged with HDFC Growth Fund which was a multi-cap fund. The consolidated fund is named as HDFC Balanced Advantage Fund which follows a similar investment style as followed by HDFC Prudence Fund. It belongs to the category of dynamic asset allocation, in which the allocation of the corpus is shifted according to the trends in the market in order to grab the maximum benefits. At some time, the equity market is on the rise while on the other times, it faces a downfall, hence active allocation between the debt and equity asset classes can be beneficial in providing consistent growth. HDFC Balanced Advantage Fund has a gigantic AUM of Rs 37,850 crore as of 31st July 2018 which gives the idea of the trust investors have in this scheme. It has the highest AUM among the peers of its category.
What Is the Investment Strategy?
The fund aims to deliver long-term capital appreciation from a dynamic blend of equity and debt instruments. It generally maintains higher equity allocation to provide better returns, but it can be changed if the situation demands it. In recent years, nearly 75% of the corpus has been allocated in the equity instruments and the rest in debt instruments. The equity allocation has been mainly done in the potential large-cap stocks of superior quality. The investment style followed by the fund manager is a blend of growth and value investing. Finance, energy, technology, and construction sectors are the top priority of the fund manager. Infosys, SBI, ICICI Bank, Larsen & Toubro, and NTPC are the top holders of the scheme.
The debt investment for the scheme is slightly conservative with the presence of high-quality debt instruments, but the rate sensitivity of the instruments is high. Most of the securities are of AA and AAA credit ratings and the maturity period of long tenures.
Who Is the Fund Manager?
Mr. Prashant Jain has been managing the HDFC Prudence Fund Growth for a long time. He is the fund manager of HDFC Balanced Advantage Fund. Mr. Jain is the senior fund manager at HDFC Mutual Fund for 17 years. Before that, he was associated with Zurich AMC and SBI Mutual Fund. He is a B.Tech from IIT Kanpur, PGDM from IIM Bangalore, and CFA from AIMR, USA. He has handled the scheme well in the past, especially in the positive market, but the negative equity market has been a challenge for him. The annual returns have mostly stayed above the benchmark and category’s average in the favorable market conditions.
How Did it Perform in the Past?
HDFC Prudence Fund has been a decent performer in its category with a fantastic long-term track record. The trailing returns of last 5,7 and 10 years are 21.08%, 14.13%, and 15.45% which are well above the benchmark and category’s average. The returns for the last 3 years are not up to the mark due to a decent performance in 2015 and 2016. It bounced back in 2017 with a higher return than the peers and is expected to maintain the consistency in future. Since inception in September 2000, it has generated an annualized return of 18.95%.
HDFC Balanced Advantage Fund maintains a balanced portfolio to take advantage of rising and fall in both the asset classes. It is an actively managed fund with a low-risk portfolio and provides decent returns in the long term. Though the recent market has not been supportive of HDFC Balanced Advantage Fund, the strong support of HDFC Mutual Fund can be trusted to perform better in future. It is suitable for the investors who have a low-risk appetite.
