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Suresh Krishnamurthy

IF EXPECTED annual returns of about 12 per cent over a long period excite you then balanced funds are an appropriate prescription. Among them, HDFC Prudence has an outstanding record. The performance of FT India Balanced Fund has also been impressive in the period between 2001 and now. It has performed consistently well, and better than most of its peers and its benchmark. Investments can be considered in this fund with a long-term perspective.

The performance of Franklin India Balanced, which was to be merged with FT India Balanced in July 2004, for which separate net asset values are still available, has been better than that of FT India Balanced. The merger, which is inevitable, may prove positive to the shareholders of FT India Balanced as well. As things stand, it is highly likely that the portfolio for Franklin India Balanced and FT India Balanced are identical.

Performance: Between March 2001 and March 2005, the fund has delivered positive returns in 33 out of the 48 months. The average monthly return has been about 2.02 per cent better than that of Nifty's return of 1.43 per cent and the average of 1.86 per cent for its peers. In consistency, FT India Balanced trails Franklin India Balanced. It is, however, still better than that of the average for balanced funds.

Portfolio: Franklin India Balanced is a small fund with assets under management of less than Rs 200 crore. This is a definite advantage for investors as it gives the manager flexibility in executing the investment strategy.

The negative aspect in the case of a small fund is that debt fund management necessarily has to be relatively passive. This is reflected in the number of securities in its debt portfolio — less than ten, and with the bulk of assets invested in corporate securities.

This negative aspect can be more than offset by the available flexibility in making tactical asset allocation changes as well as in security selection.

At the end of April 2005, the fund was almost fully invested with less than 1.5 per cent in cash. About 65 per cent was invested in equities. The equity portfolio is mid-cap heavy, which is another attractive feature for long-term equity investors.

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