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| Those who look for protection against bears will find Sundaram Balanced Fund's consistency rewarding
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| Background: Sundaram Balanced Fund was launched in December 1999. Entry into the fund requires a minimum investment of Rs 5,000 and is subject to a 1.5 per cent entry load.
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| Performance: If one were to describe the performance of Sundaram Balanced in one word, it would be discipline.
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| The fund has stuck to the basic formula for a well-run balanced fund: consistent asset allocation, a well-diversified equity portfolio where stocks stay for the long haul, and in debt, the risk of high-yield bonds tempered by a low exposure to gilts.
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| The strategy has given the fund three-year annualised returns of 17.48 per cent.
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| Portfolio: The fund's philosophy was on display during the turbulent years of 2000 and 2001. It didn't indulge itself in over-priced tech stocks and sailed through 2001 with a loss of just 4 per cent against its category's average loss of 9.1 per cent.
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| Even later, tech has seldom dominated the fund's equity portfolio, with allocation to the sector averaging around 8-10 per cent. And lately, the fund has reduced exposure to the volatile sector, with the allocation down to just around 5 per cent.
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| While the fund does fine-tune its portfolio to be a part of various sector-led rallies from time to time, its aversion to being overweight on any particular sector means that its gains and risks from such moves will be considerably less than its more aggressive peers.
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| When energy stocks rallied in the first quarter of 2002, the fund held 3-4 per cent in the sector while the top performers during the period held nearly 10 per cent in energy scrips. Thus, it ended up in the second quartile.
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| Similarly, the fund did buy PSU bank stocks during the run-up in late-2002 and early-2003, but has pruned its exposure now. Still, the fund's buy-and-hold strategy for stocks like ONGC (since May 2002) and SBI (since September 2001) is reaping rich dividends.
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| The fund's debt portfolio has seen a shift towards quality, as the allocation to high-yielding but below-AAA rated bonds has come down from an average 19 per cent in 2002 to 9.78 per cent in August 2003.
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| While largely staying away from gilts during its tenure, the fund has actively sought them in recent months only to finally exit in September.
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| Outlook: At the end of the day, Sundaram Balanced Fund is as diversified as it gets. The fund is a good choice for those who look for protection against bears.
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| Its discipline and consistency will be rewarding over the long haul. |
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