Equity-oriented Balanced Mutual Funds are recommended if you want to protect your investment during the downturn and yet capitalize on returns. These funds are a combination of equity and debt. With a minimum of 65 percent in equities, these funds are treated as equity funds for tax purposes, which means the returns are tax-free after 1 year. In the past ten years, it has been seen that balanced funds give returns, which have outpaced those of large-cap funds.
Let us look at the top 5 equity-oriented Balanced Funds for 2016.
The given data is based on information as on August 31, 2016:
1. Tata Balanced Fund – It has delivered 24.52 percent, 18.62 percent and 15.42 percent per annum return in a 3, 5 and 10-year period. The returns since launch (October 08, 1995) has been 16.65 percent per annum. The AUM size of this fund is Rs.6723 crore and the expense ratio is 2.27 percent.
The fund managers are Akhil Mittal (since July 2015) and Pradeep Gokhale (since April 2016). It is a fund that has delivered admirably well with high returns in both equity and debt. A rock-solid performer, it has been among the top ten balanced funds in 8 out of the past 10 years. The fund keeps a 75:25 equity to debt allocation ratio. The fund’s equity component is tilted to mid-cap compared to other funds in its category.
2. SBI Magnum Balanced Fund – This fund has delivered 23.85 percent, 18.54 percent and 12.66 percent per annum return in a 3, 5 and 10-year period, respectively. An old fund like Tata Balanced Fund, the SBI Magnum Balanced Fund was formed in December 31, 1995; with returns since inception pegged at 16.76 percent per annum. The AUM size is Rs. 6,205 crore and the expense ratio is 2.00 percent.
The fund managers are Dinesh Ahuja (since January 2011) and R. Srinivasan (since January 2012). This fund did take a beating between the periods 2008 and 2011, after which it registered a phenomenal comeback. SBI Magnum Balanced Fund has outpaced its category average as well as the benchmark by a strong margin, in the last five years. This fund also maintains a 75-25 equity to debt allocation; and the equity exposure is multi cap diversified with 50 percent roughly in large-caps and the rest in a combination of small caps and mid-caps.
3. ICICI Prudential Balanced Fund – This fund came into existence on November 3, 1999 and till date has delivered 14.91 percent returns per annum. For the past 3, 5 and 10 years, it has delivered 23.73 percent, 18.38 percent and 12.75 percent returns per annum. The AUM size of the fund is Rs. 3,477 crore and the expense ratio is 2.34 percent.
The fund managers are Atul Patel, Manish Banthia and Sanskaran Naren. The equity allocation is between the range of 60 to 80 percent, with the remaining in debt.
4. L&T India Prudence Fund – This fund has delivered 24.21 percent and 17.83 percent return per annum in a 3 and 5-year period. It was launched on January 31, 2011 and since its inception, has delivered 14.46 percent per annum return. The AUM size is Rs. 2,513 crore and the expense ratio is 2.08 percent.
The fund managers associated with the fund are Abhijeet Dakshikar, Shriram Ramanathan and Soumendra Nath Lahiri. The fund is a newcomer in front of the three veterans mentioned above, but nevertheless, it has proved its mettle in the past five years since its launch. The fund invests 65 to 75 percent in equities, while the rest goes in debt. The equity exposure is multi-cap based with higher than average allocation to mid-caps and small caps. The only flipside is that this fund has not really seen a market-averse situation, its performance is yet to be seen in a bear market scenario.
5. HDFC Balanced Fund – This fund was launched on September 11, 2000 and since its launch has given 16.86 percent returns per annum. The AUM size is Rs. 7,074 crore and the expense ratio is 1.94 percent. Since the past 3, 5 and 10 years, it has delivered 26.82 percent, 17.42 percent and 15.03 percent returns per annum.
The fund manager is Chirag Setalvad, who has been associated with the fund since 2007. HDFC Balanced Fund is tailor-made for the bull run; it has 70 to 72 percent allocation in equities with the rest in debt. Compared to the peers in its category, this fund has a higher exposure to small caps and mid-caps. The debt component is well invested in high quality bonds with extended duration. The fund has also proven its mettle in the downside, especially in the bear markets of 2008 and 2011.