{"id":831,"date":"2019-08-02T05:29:57","date_gmt":"2019-08-02T05:29:57","guid":{"rendered":"http:\/\/blog.certifiedfinancialguardian.com\/?p=831"},"modified":"2019-08-02T06:00:34","modified_gmt":"2019-08-02T06:00:34","slug":"hdfc-balanced-advantage-fund-balancing-risks-and-returns","status":"publish","type":"post","link":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/2019\/08\/02\/hdfc-balanced-advantage-fund-balancing-risks-and-returns\/","title":{"rendered":"HDFC Balanced Advantage Fund: Balancing Risks And Returns"},"content":{"rendered":"\n

Stock markets go through volatile phase\nevery now and then. At such times a dynamic asset allocation strategy could\nhelp investors tide over volatility and generate better returns. A balanced\nadvantage fund aims to do just that.<\/p>\n\n\n\n

With a long track record of over 25 years and an AUM of over Rs 43,000 crore, HDFC Balanced Advantage<\/a> Fund (erstwhile HDFC Prudence Fund) is one of the most popular funds in the Balanced Advantage Funds category. <\/p>\n\n\n\n

As per SEBI mandates, balanced advantage\nfunds can manage their allocation in equity and debt dynamically. While the\nequity component helps in appreciation of wealth, the debt component intends to\nprovide an element of stability to the portfolio.<\/p>\n\n\n\n

Even though the fund now has the\nflexibility of dynamic asset allocation with effect from June 2018, its\nallocation strategy remains similar to its former category.<\/p>\n\n\n\n

Mr Prashant Jain has been the manager of\nthe scheme since inception, along with Mr Amar Kalkrundikar (Overseas\ninvestments) since January 10, 2019.<\/p>\n\n\n\n

In this brief analysis, we take a close\nlook at the features and performance of HDFC Balance Advantage Fund.<\/p>\n\n\n\n

Investment objective of HDFC Balanced\nAdvantage Fund<\/strong><\/p>\n\n\n\n

The investment objective of the scheme is\nto provide long-term capital appreciation\/income from a dynamic mix of equity\nand debt investments.<\/p>\n\n\n\n

Fund Facts HDFC Balanced Advantage Fund<\/strong><\/strong><\/p>\n\n\n\n

\n Category<\/strong>\n <\/td>\n Balanced Advantage Fund\n <\/td>\n Style<\/strong>\n <\/td>\n Growth\n <\/td><\/tr>
\n Type<\/strong>\n <\/td>\n Open ended\n <\/td>\n Market Cap Bias<\/strong>\n <\/td>\n Large cap\n <\/td><\/tr>
\n Launch Date<\/strong>\n <\/td>\n 01-Feb-1994\n <\/td>\n SI Return (CAGR)<\/strong>\n <\/td>\n 18.25%\n <\/td><\/tr>
\n Corpus (Cr)<\/strong>\n <\/td>\n Rs 43,168\n <\/td>\n Min. \/Add. Inv.<\/strong>\n <\/td>\n Rs 5,000 \/ Rs 1,000\n <\/td><\/tr>
\n Expense Ratio (Dir\/Reg)<\/strong>\n <\/td>\n 1.19% \/ 1.59%\n <\/td>\n Exit Load<\/strong>\n <\/td>\n 1%\n <\/td><\/tr><\/tbody><\/table><\/center>\n\n\n\n

Portfolio Data as on June 30, 2019.
SI Return as on July 31, 2019.
\n (Source: ACE MF) <\/p>\n\n\n\n

Growth Of Rs 10,000, If Invested In HDFC\nBalanced Advantage Fund<\/strong> 5 Years Ago<\/strong><\/p>\n\n\n\n

\"\"<\/figure><\/div>\n\n\n\n

Data as on July 31, 2019
\n(Source: ACE MF)<\/p>\n\n\n\n

Had you invested Rs 10,000 in HDFC Balanced Advantage Fund five years back on July 31, 2014, it would have grown to Rs 16,753. This translates into compounded annualised growth rate of 10.87%. <\/p>\n\n\n\n

In comparison a simultaneous investment of Rs 10,000 in CRISIL Hybrid 35+65 – Aggressive Index would now be worth Rs 15,871 (a CAGR of 9.68%). As can be seen in the chart above, the fund was able to generate alpha over CRISIL Hybrid 35+65 – Aggressive Index from 2017 onwards and it still continues, while it lagged in the year 2015-16. In the remaining years its performance was nearly in line with the index.<\/p>\n\n\n\n

HDFC\nBalanced Advantage Fund<\/strong>: Year-on-Year Performance<\/strong><\/p>\n\n\n\n

\"\"<\/figure><\/div>\n\n\n\n

YTD as on July 31, 2019
\n(Source: ACE MF)<\/p>\n\n\n\n

Launched in the year 1994, HDFC Balanced Advantage Fund has a track record of over 25 years. The year-on-year performance comparison of the scheme vis-\u00e0-vis CRISIL Hybrid 35+65 Aggressive Index shows that the fund has outperformed the index in 4 out of last 8 calendar years. It managed to generate alpha in CY 2012, 2014, 2016 and 2017, with the majority of it being during the market rally of 2014. In CY 2015 and 2018 the fund gave negative returns even as the index generated positive returns. It also performed poorly in CY 2013 and failed to manage the downside in CY 2011. <\/p>\n\n\n\n

In the current year the fund is showing slight underperformance when compared to CRISIL Hybrid 35+65 Aggressive Index.<\/p>\n\n\n\n

HDFC\nBalanced Advantage<\/strong> Fund: Performance\nvis-\u00e0-vis category peers<\/strong><\/p>\n\n\n\n
\n Scheme\n name<\/strong>\n <\/td>\n Corpus (Cr.)<\/strong>\n <\/td>\n 1-year (%)<\/strong>\n <\/td>\n 2-year (%)<\/strong>\n <\/td>\n 3-year (%)<\/strong>\n <\/td>\n 5-year (%)<\/strong>\n <\/td>\n Std Dev<\/strong>\n <\/td>\n Sharpe<\/strong>\n <\/td><\/tr>
\n HDFC Balanced Advantage Fund<\/a>\n <\/td>\n 43,168\n <\/td>\n 4.38\n <\/td>\n 9.38\n <\/td>\n 13.31\n <\/td>\n 16.34\n <\/td>\n 11.44\n <\/td>\n 0.12\n <\/td><\/tr>
\n Reliance Balanced Advantage Fund<\/a>\n <\/td>\n 2,040\n <\/td>\n 5.09\n <\/td>\n 9.89\n <\/td>\n 12.25\n <\/td>\n 14.12\n <\/td>\n 9.44\n <\/td>\n 0.11\n <\/td><\/tr>
\n Aditya Birla SL Balanced Advantage Fund<\/a>\n <\/td>\n 2,766\n <\/td>\n 4.00\n <\/td>\n 7.17\n <\/td>\n 12.11\n <\/td>\n 12.89\n <\/td>\n 6.02\n <\/td>\n 0.06\n <\/td><\/tr>
\n ICICI Pru Balanced Advantage Fund<\/a>\n <\/td>\n 28,709\n <\/td>\n 5.69\n <\/td>\n 9.46\n <\/td>\n 11.31\n <\/td>\n 13.78\n <\/td>\n 5.66\n <\/td>\n 0.10\n <\/td><\/tr>
\n Edelweiss Balanced Advantage Fund<\/a>\n <\/td>\n 1,450\n <\/td>\n 5.03\n <\/td>\n 9.76\n <\/td>\n 9.10\n <\/td>\n 11.64\n <\/td>\n 8.21\n <\/td>\n 0.04\n <\/td><\/tr>
\n Principal Balanced Advantage Fund<\/a>\n <\/td>\n 214\n <\/td>\n 5.27\n <\/td>\n 7.37\n <\/td>\n 8.54\n <\/td>\n 11.64\n <\/td>\n 4.08\n <\/td>\n -0.07\n <\/td><\/tr>
\n CRISIL\n Hybrid 35+65 – Aggressive Index\n <\/td> \n \n <\/td>\n 5.73\n <\/td>\n 10.04\n <\/td>\n 11.78\n <\/td>\n 12.73\n <\/td>\n 8.11\n <\/td>\n 0.10\n <\/td><\/tr><\/tbody><\/table>\n\n\n\n

Returns are on a rolling basis and in %, calculated using Direct Plan \u2013\nGrowth option. Those depicted over 1-Yr are compounded annualised.
\n(Data as on July 31, 2019)
\n(Source: ACE MF)<\/p>\n\n\n\n

*Please note, this table only represents the best\nperforming funds based solely on past returns and is NOT a recommendation. Mutual\nFund investments are subject to market risks. Read all scheme related documents\ncarefully. Past performance is not an indicator for future returns. The\npercentage returns shown are only for indicative purposes.<\/strong><\/p>\n\n\n\n

HDFC Balanced Advantage Fund underperformed\nCRISIL Hybrid 35+65 Aggressive Index in 1-year and 2-year rolling period.\nHowever, over 3-year and 5-year rolling return periods, the fund outperformed\nthe index with a decent margin. It managed to beat average category returns\nacross rolling periods, except 1-year rolling period.<\/p>\n\n\n\n

In terms of risk-return parameters, the fund undertakes the highest risk as compared to category peers and index. However, its risk-adjusted return is among the best.<\/p>\n\n\n\n

The fund was also the top performer on a 3-year and 5-year rolling period. The other top performers in the 3-year rolling period included Reliance Balanced Advantage Fund and Aditya Birla SL Balanced Advantage Fund.<\/p>\n\n\n\n

Investment Strategy of HDFC Balanced Advantage<\/strong> Fund<\/strong><\/p>\n\n\n\n

The fund\u2019s investment objective is to\nprovide long-term capital appreciation\/income from a mix of equity and debt\ninvestments. The fund manager determines asset allocation between equity and\ndebt depending on prevailing market and economic conditions.<\/p>\n\n\n\n

The aim of equity strategy is to build a\nportfolio of companies diversified across major industries, economic sectors\nand market capitalisations that offer an acceptable risk-reward balance.<\/p>\n\n\n\n

Investment in debt securities is guided by\ncredit quality, liquidity, interest rates and their outlook.<\/p>\n\n\n\n

The debt-equity mix at any point of time is\na function of interest rates, equity valuations, medium to long-term outlook of\nasset classes and risk management etc.<\/p>\n\n\n\n

HDFC\nBalanced Advantage<\/strong> Fund Portfolio Allocation\nAnd Market Capitalisation Trend<\/strong><\/p>\n\n\n\n

\"\"<\/figure><\/div>\n\n\n\n

Holdings (in %) as on June 30,\n2019
(Source: ACE MF)<\/p>\n\n\n\n

The fund has the flexibility to dynamically\nmanage equity and debt mix. It however, prefers to keep an equity bias. HDFC\nBalanced Advantage Fund holds 75-85% of its portfolio in equities. The exposure\nto large-caps is in the range of 60-70%, while the allocation towards mid and\nsmall-caps is 5-10% each. The fund maintains 15-25% of its portfolio in cash\nand debt instruments.<\/p>\n\n\n\n

HDFC\nBalanced Advantage<\/strong> Fund Top Portfolio\nHoldings<\/strong><\/p>\n\n\n\n

\"\"<\/figure><\/div>\n\n\n\n

Holdings (in %) as on June 30, 2019
(Source: ACE MF) <\/p>\n\n\n\n

Being a large sized fund, HDFC Balanced\nAdvantage Fund has 67 stocks in its portfolio diversified across various\nsectors. The top 10 stocks constitute 52.2% holding of the portfolio. State\nBank of India has the highest allocation at 9.8% followed by ICICI Bank with an\nallocation of 9.4%. Infosys (7.8%) and Larsen & Toubro (7%) follow closely\nbehind. The other stocks in the top 10 portfolio have an allocation of 2-4%,\neach.<\/p>\n\n\n\n

In terms of sector wise holdings, a quarter\nof the fund\u2019s portfolio is exposed to Bank. This is followed by Infotech,\nEngineering and Power with an allocation of around 9% each. Petroleum products\nare the next in the list with an exposure of 6%.<\/p>\n\n\n\n

Investments in debt securities\npredominantly include corporate debts of banks having moderate to high credit\nratings.<\/p>\n\n\n\n

Top\nContributors<\/strong><\/p>\n\n\n\n

Among the stocks in the portfolio, ICICI\nBank contributed the most to gains of the portfolio in the last one year with a\nportfolio return of 3.4%. State Bank of India and Larsen & Toubro were the\nother top contributors adding 1.8% and 1.2%, respectively to the funds return.<\/p>\n\n\n\n

The stocks that eroded portfolio gains the\nmost were GAIL (India), Vedanta, Vijaya Bank, Bank of Baroda and Apollo Tyres. <\/p>\n\n\n\n

Suitability of HDFC Balanced Advantage<\/strong> Fund<\/strong><\/p>\n\n\n\n

HDFC Balance Advantage Fund is suitable for\ninvestors looking for capital appreciation along with some amount of stability\nby investing in a mix of equity and debt. The fund maintains an equity\nallocation of over 65% to be qualified as an equity scheme.<\/p>\n\n\n\n

The scheme has a large-cap bias, but it\nalso looks for opportunities in the small and mid-cap space. Debt investments\nare mainly in top quality corporate debts to reduce credit risk. Thus, the fund\ncarries moderately high risk and suitable for an investment horizon of 3 years\nor more.<\/p>\n\n\n\n

The fund has one of the largest asset sizes\nand this can hamper its agility. However, it has an able fund manager at helm\nwho has been managing such a strategy for more than 25 years.<\/p>\n\n\n\n

Though the fund\u2019s performance in shorter\ntime horizon has not been impressive enough, it has rewarded investors over\nlonger time periods.<\/p>\n\n\n\n

The scheme is\nwell-diversified across sectors which can help in reducing the volatility and\nthe risk involved. However,\none should weigh all the options and make a prudent choice while investing in\nmutual funds.<\/p>\n\n\n\n

Note<\/strong>: <\/strong>This write\nup is for information purpose and not a recommendation to buy or sell the\nmutual fund scheme. As an investor, you need to pick the right fund to meet\nyour financial goals. If you are not sure about your risk appetite, do consult\nyour investment consultant\/advisor.<\/p>\n","protected":false},"excerpt":{"rendered":"

Stock markets go through volatile phase every now and then. At such times a dynamic asset allocation strategy could help investors tide over volatility and generate better returns. A balanced advantage fund aims to do just that. With a long track record of over 25 years and an AUM of over Rs 43,000 crore, HDFC…<\/p>\n","protected":false},"author":5,"featured_media":838,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"cybocfi_hide_featured_image":""},"categories":[3],"tags":[],"_links":{"self":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts\/831"}],"collection":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/comments?post=831"}],"version-history":[{"count":3,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts\/831\/revisions"}],"predecessor-version":[{"id":843,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts\/831\/revisions\/843"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/media\/838"}],"wp:attachment":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/media?parent=831"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/categories?post=831"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/tags?post=831"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}