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Launched on October 8, 1995, Tata Balanced Fund is an equity-oriented hybrid fund with average assets under management (AUM) of Rs 509 crore for the quarter ended March.
The fund has been ranked CRISIL Fund Rank 2 (top 30 percentile of the funds in the category) within the balanced category under the CRISIL Mutual Fund ranking methodology since the past 11 quarters (except December 2011). Balanced funds are equity-oriented funds with 25-35 per cent allocation to debt and money market instruments, depending upon the market scenario. Investors, thus, get the benefit of simultaneous investments into both equity and debt asset classes. Additionally, balanced funds are treated as equity funds from a tax perspective if the equity allocation is more than 65 per cent. Accordingly, capital gains are tax-free for a period greater than one year.
Investment approach
The fund intends to provide income distribution through long-term capital gains, while emphasising the importance of capital appreciation.
Performance
The fund has outperformed its benchmark (CRISIL Balanced Fund Index) and the category average across various time frames (one, three, five, seven and 10 years). (see chart). The fund has also outperformed the category on a risk-adjusted basis as indicated by a higher Sharpe ratio of 0.24 vis-a-vis the category’s 0.16 over a three-year period.
Further, Rs 10,000 invested in the fund since April 1, 2002 would have grown over seven times to Rs 72,030 (annualised growth rate of 19.5 per cent) as on April 29, 2013. A similar investment in the benchmark and category would have grown to Rs 38,987 and Rs 67,520, at a growth rate of 13 per cent and 18.8 per cent per annum, respectively.
A monthly investment of Rs ,1000 under systematic investment plan (SIP) over 10 years would have grown to Rs 2,71,416 at a growth rate of 16 per cent a year. A similar investment in the benchmark would have grown Rs 2,08,177 at a growth rate of 11 per cent per annum. Even a five-year SIP in the fund has given over 13 per cent returns per annum.
Portfolio analysis
The fund has maintained an average 74 per cent exposure to equity over the past three years, the lowest exposure being 71 per cent. The fund, therefore, consistently maintains high exposure to equity. The equity exposure has been mainly into large-cap stocks.
The fund has 49 equity stocks on an average in its portfolio, which is in line with the category. However, its top five equity holdings form 27 per cent of the fund vis-à-vis 32 per cent for the category. At the sector level, the top five equity sectors form 51 per cent of the fund as against 53 per cent for the category. The fund is, therefore, well diversified both at the sector and stock levels.
Higher exposure to consumer non-durables (FMCG), finance and pharma sectors as well as lower exposure to industrial capital goods helped the fund outperform over the past three years. While the CNX Nifty returned three per cent over this period, FMCG, finance and pharma sector indices returned 28 per cent, eight per cent and 14 per cent, respectively, thereby outperforming the broad-based market index. On the other hand, capital goods sector index underperformed the CNX Nifty with returns of negative 14 per cent.
On the debt side, the fund held the top rank on the asset quality parameter under the CRISIL Mutual Fund Ranking for the quarter ended March 2013. Over the past three years, the fund’s debt exposure has majorly been into top-rated debt papers and government securities.
CRISIL Research
