• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Aarati Krishnan

RISK-AVERSE investors in Canpremium, the balanced fund from Canbank Mutual Fund, can consider booking profits in the fund. It has capitalised on the sharp run-up in a few PSU stocks to generate positive returns of around 8 per cent in the first eight months of 2002. It also has a reasonable track record over the past four years.

However, balanced funds are usually favoured by conservative investors looking for higher returns than those offered by a debt fund, with low downside risk. But the portfolio strategy adopted by Canpremium suggests that it has assumed a fairly high degree of risk with its concentrated approach to its investments and preference for small/mid cap stocks. It may not be a suitable investment for conservative investors.

Performance: Regular dividend payouts and a debt tilt have ensured that Canpremium has generated reasonable returns over the past four years. Since the scheme was converted into an open-end fund in February 1998, it has generated an annualised return of around 13.5 per cent, which compares quite favourably with the majority of balanced schemes in operation. However, the asset allocation pattern has been quite fluid.

In September 2001, the fund had 81 per cent of its assets parked in debt and money market instruments with just 18 per cent invested in equities. By March 2002, the debt portion was down to 69 per cent, while the equity exposure was hiked to 31 per cent.

By September 2002, the equity exposures were hiked further to 37 per cent, while the debt portion shrunk further. From this, it appears that the fund takes an active approach to asset allocation and does not rebalance its portfolio to maintain a consistent mix between equity and debt.

The fund has also adopted a concentrated approach, at least to the debt portion of its portfolio. For instance, over the past six months, almost the entire debt portion was parked in just one gilt security — the 9.85 per cent Central Government bond maturing in 2015.

By August 2002, 42 per cent of the assets were invested in just this security (the concentration is probably partly due to the small size of the fund).

Send this article to Friends by E-Mail

Stories in this Section
Watches: Time to tap the potential

Copyright © 2002, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line