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Aarati Krishnan

INVESTORS seeking a moderate exposure to equities through a balanced fund can consider investing in the Templeton India Pension plan.

The fund has turned in a compound annual return of about 19 per cent over the past three years. But investors should expect a much lower return going forward, given that returns from the debt portion are likely to have fallen sharply.

The fund has turned in a good performance over the past year in relation to its benchmarks and also has a good five-year track record. Investments in the fund are eligible for the tax rebate under Section 88 and carry the three-year lock-in period that goes with the rebate.

Suitability: With a 35-40 per cent exposure to equities, and 60-65 per cent of its portfolio parked in debt, Templeton India Pension Plan lies somewhere between a typical balanced fund (equity exposure usually at 60 per cent) and a monthly income plan (equity exposure of 10-20 per cent), in terms of its risk profile and return potential. Only investors prepared for a long stay should consider the fund, given its exit load structure.

Performance: The fund has acquitted itself well over the past year, with a 20 per cent return over a one-year period. The fund's returns compare well to a benchmark with a similar asset mix of the Nifty and CRISIL Bond Fund Index.

In the past, balanced funds have tended to underperform an option of taking direct exposures to pure equity and pure income funds. But Templeton India Pension Plan appears to have improved in this respect as well.

An investor who invested directly in the Franklin India Bluechip and Templeton Income Builder Account in the proportion of 40:60 would have earned about 19 per cent over the year, against this fund's returns of 20 per cent.

For the equity portion, the fund has stayed mainly with large-cap stocks, with a bias towards the technology sector. Returns on the debt portion of the portfolio are likely to have dwindled over the past year, with the upward bias in interest rates.

But the fund appears to have protected against falling bond prices by parking a significant part of the portfolio in liquid instruments and fixed income investments such as bank deposits.

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