- Editor Rating
- Rated 4 stars
- HDFC Prudence Fund
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HDFC Prudence Fund is a balanced fund with 74.68 percent exposure to equities and 24.76 percent allocation in debt and cash. Let us review this fund in greater detail to know if you should buy, sell or hold this fund.
Basic information and costs
The fund has been around for a long time; it was launched on 1st February 1994. This equity-oriented fund has an average AUM (Assets Under Management) of Rs 19959 crores (as on April 2017). The minimum investment is Rs. 5000 if you take the lump sum route, and Rs. 500 if you invest through SIP (Systematic Investment Planning).
The expense ratio is 2.26 percent and there is an exit load of 1 percent if you redeem the investment within one year of holding the fund. The fund manager is Prashant Jain, who has also managed some of the best HDFC mutual funds like HDFC Equity Fund (Growth), HDFC Top 200, HDFC MIP and HDC Infrastructure, among others. With a track record of more than 22 years, he is one of India’s highest paid fund managers.
Out of the 74.75 percent money invested in equities, 54.45 percent is invested in large caps, 26,67 percent in mid-caps and 17.89 percent is pooled in small caps
The top five sectors that the fund concentrates on are Finance (21.46 percent), Energy (9.39 percent), Diversified (7.63 percent), Technology (7.46) and Services (4.72 percent).
The top stocks in its portfolio are State Bank of India (7.76 percent), Larsen & Tourbo (6.17 percent), ICICI Bank (6 percent), Infosys (5.31 percent) and Reliance Industries (3.22 percent)
As on April 13, 2017, HDFC Prudence has delivered 15.14 percent per annum return in a 10-year period. This means it has outperformed the benchmark returns of a balanced fund which is 8.41 percent, for that period. HDFC Prudence has also beaten the ‘category average’ of balanced funds, which is 11.41 percent. Since inception, it has given 19.46 percent return per annum.
HDFC Prudence ranks 3rd as the best balanced fund in 10 years. It ranks 11th, 20th and 5th in a 5, 3 and 1-year horizon, respectively.
HDFC Prudence has a heavy tilt towards the finance sector, if you take the top holdings in consideration. Based on a 3-year data, the standard deviation of the fund (volatility of the fund’s return with respect to its average) is relatively high at 15.66 percent compared to the category average of 11.63 percent.
What works in the advantage of HDFC Prudence Fund is that it has a long-term track record coupled with an experienced and accomplished fund manager. The fund manager does take a riskier approach compared to its peers. It places heavy bets on banking stocks. The companies that the fund invests in, have lower market capitalization, compared to its peers. Even when it comes to investing in debt fund, HDFC Prudence gives more weightage to government papers with long maturity periods; which can be sensitive to changes in interest rates. You should ideally invest in this balanced fund, if you have a relatively high risk appetite.
Should I buy, sell or hold?
The performance of the fund has improved in the last 1 year and the sectoral bets of fund manager has paid off. The fund can be part of the portfolio because of long track record, good fund manager and aggressive play which can create extra return.
Excellent Fund Manager
Excellent Fund House
Good Fund Size
Aggressive calls across sectors
Average Consistency of Performance
Average Expense Ratio