Friday, May 20, 2011

THE FUND EVERY INVESTOR SHOULD HAVE




HDFC PRUDENCE FUND - THE BALANCED FUND THAT WORKS LIKE EQUITY FUND


WANT EQUITY RETURNS WITHOUT THE ACCOMPANYING VOLATILITY AND HEADACHE?????

Then, the answer is .... without any second thoughts....
HDFC PRUDENCE FUND!!!!!

This seed of thought was sown in my mind when one of clients, Munnawar Ali, asked this question.

Munnawar Ali wrote: "Sir, Can you suggest any one fund which should be the 'ONE' every investor should have. I am a new investor to the Equity field itself. Which fund would suggest me.?"


Srikanth Matrubai answered : "It's good Munnawar,  that you have chosen the Mutual Fund route to take exposure to the Equities.

Equities are the BEST asset class in the long term. While pinpointing any one single fund is very difficult, especially as not only the Markets are dynamic, even the changes in Fund attributes, Fund Manager, would all have bearing on the performance of a Fund.

Still, I would stick my neck out and, without any second thoughts, say if any investor has to a Fund compulsorily in his portfolio,it has to be HDFC PRUDENCE FUND.


HDFC PRUDENCE FUND was lauched on February 1, 1994 and is one of the oldest Balanced in India.
The Fund is managed by Mr.Prashant Jain.

HDFC PRUDENCE FUND is a Balanced Fund with a mandate to invest between 40-75% in equity and the balance in Debt instruments.
The Fund tends to be fully invested in Equity over all periods of time with a passive style of investment touching its peak of 75% most of time.

WORKING OF BALANCED FUND :
Due to their mandate, Balanced Funds have to maintain Asset Allocation in ratio of ,say, 70:30(Equity/Debt). This automatically ensures that whenever the Equity outperforms, the ratio raises in favour of Equity and the Fund Manager has to sell
Equity to maintain the Balance.
Likewise, when Equity markets tank, the equity ratio declines and Debt raises, and thus the Fund Manager has to sell Debt and more Equity to maintain the Balance.
This automatically ensures that the Fund Manager, invariably, is selling at higher rates and buying at lower rates.
This Asset Allocation automatically ensures superior returns over Long Term over even Pure Equity Funds.



FUND INVESTMENT PROFILE :
The Equity investment has tended to veer towards mid caps.
However, in Debt, it is quite aggressive on the lookout to take advantage of any volatility in Debt Market. It has of late started to invest more in Triple A instruments which gives more protection.


HDFC PRUDENCE FUND has been a boringly top quartile performer since a long long time. It has given Equity type returns and inspite of being a Balanced Fund, has fared better than majority of Pure Equity Funds over all all types of Market Conditions.

Its Mid cap bais in equity is offset by Debt investment and hence the volatility is not so much as to cause concern.

The returns of HDFC Prudence has been way ahead of its peers like Birla Sunlife 95, DSPBR Balanced Fund, etc.

In fact, the returns compares favourably with even Diversified Equity Funds, despite HDFC PRUDENCE FUND being a Balanced fund.



NEGATIVES :
Its huge huge Asset Size of 5800 crores could be a problem. But Prashant Jain, the Fund Manager, has shown his ability to manage such huge Asset Size even with the other funds he manages (HDFC Equity manages 8400 crores, HDFC Top 200 manages 9600 crores).


RECOMMENDATION :
HDFC PRUDENCE FUND  is a "must" in any investor's core portfolio.
HDFC Prudence Fund will provide good hedge against sharp equity falls.
If any investor wants to invest in only ONE Mutual Fund, then THIS is the Fund, the HDFC PRUDENCE FUND.

Best of luck,
Srikanth Matrubai


Also visit http://equityadvise.blogspot.com

Sunday, May 15, 2011

SUNDARAM EQUITY PLUS FUND - A REVIEW AND ANALYSIS

MORE STABLE, LESS RISKY



Aiming to get the best of Gold and Equity, Sundaram Equity Plus Fund follows successful UTI Wealth Builder Series II Fund.

UTI Wealth Builder Series II has been very successful. It has beaten its Benchmark both in Positive and Negative times.
It has risen more and fallen less.

Can we expect the same from Sundaram Equity Plus Fund.... well that depends on how well the Equity portion is managed as the Gold investment does not need the skill of the Fund Manager expect in the extent of exposure towards Gold.
The Sundaram Equity Plus Fund aims to invest around 65% in Equity and 35% in Gold ETFs.

Gold, as we know, has been a star performer for the past couple of years. Gold is a counter cyclical in nature and hence an ideal asset tool in diversification.
But, going forward, Gold is not expected to repeat its Extraordinary performance and hence this fund could struggle to give Alphe returns.






Now, since the Fund Manager has indicated that he will be tilted towards Large Caps, and with balance in Gold ETFs, the Fund will not be volatile and may at best give you Par returns. If you want Alpha returns, then this fund is NOT for you.



Tax Advantage :
Since more than 65% is intended to be invested in Equities, there will be No Long Term Capital Gains Tax.





RECOMMENDATION :
Sundaram Equity Plus Fund is suitable for conservative investors who are looking to hedge their equity portfolio with Gold.

Sundaram Mutual Fund fans can sure go for this fund, others are better off by separating their investment and themselves investing in a Diversified Equity Fund and taking a SIP in Reliance Gold Savings fund which in turn invests in Gold ETFs.

Also read....
http://goodfundsadvisor.blogspot.com/2011/04/invest-in-gold-best-way.html





Alternatively, investors can consider investing in
UTI Wealth Builder Fund Series II
Axis Triple Advantage Fund
Canara Robecco Indigo Fund


Best of luck,
Srikanth Matrubai


Also visit http://equityadvise.blogspot.com

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