Over the last few years, when equity markets were surging northwards, balanced funds were relegated to the sidelines. Instead, equity funds, especially new fund offers were the season's flavour. Fund houses were busy launching a slew of infrastructure and global funds, among others.
And most advisors (taking a cue from the markets and fund houses alike), were busy piling up their clients' portfolios with equity fund offerings. As a result, several investors landed up with investment portfolios lop-sided in favour of equities. Expectedly the volatile equity markets have adversely affected such portfolios.
Then there are balanced funds with the mandate to invest at least 65 per cent of their portfolio in equities and the balance (35 per cent) in debt instruments. In effect, balanced funds offer investors the benefits of asset allocation, while investing in a single avenue.
Also, in times of market volatility, well-managed balanced funds can have a calming influence on portfolios, thanks to the presence of the debt component. Now is a good time to put a balanced fund under the scanner and evaluate its performance. For the purpose of this study, we have chosen a leading balanced fund offering - DSP ML Balanced Fund.
DMBF's investment proposition
Launched in May 1999, DMBF is a balanced fund from DSP ML Mutual Fund. The fund is mandated to invest 65-75 per cent of its assets in equities/equity-related instruments; debt and money market instruments can account for 25-35 per cent of the portfolio.
On the equity side, the fund generally holds a well-diversified stock portfolio comprising of stocks from across market segments. Similarly, on the debt side, the fund largely steers clear of credit and interest rate risk.
How DMBF fares vis-a-vis peers
| NAV (Rs) |
1-Yr (%) |
3-Yr (%) |
5-Yr (%) |
Since Incep. (%) |
Std Dev. (%) |
Sharpe Ratio (%) | |
| DSP ML Balanced (G) | 47.39 | 12.1 | 27.7 | 31.8 | 18.8 | 5.69 | 0.26 |
| Kotak Balance | 21.48 | 10.5 | 25.3 | 31.5 | 19.6 | 6.00 | 0.16 |
| Tata Balance (G) | 57.91 | 6.7 | 24.0 | 32.5 | 18.3 | 6.57 | 0.20 |
| Birla Sun Life 95 (G) | 200.97 | 2.9 | 22.7 | 30.6 | 25.2 | 5.94 | 0.19 |
| ICICI Pru. Balanced (G) | 36.03 | 0.0 | 20.7 | 27.8 | 16.4 | 5.87 | 0.12 |
(Standard Deviation highlights the element of risk associated with the fund. Sharpe Ratio is a measure of the returns offered by the fund vis-à-vis those offered by a risk-free instrument)
On the 3-Yr rankings, DMBF (27.7 per cent CAGR) scores over all its peers. Over the 5-yr time frame DMBF (31.8 per cent CAGR) is second only to Tata Balance (32.5 per cent CAGR). Since inception in May 1999, DMBF's net asset value has risen by 18.8 per cent CAGR. We are unable to comment on the fund's performance vis-a-vis its benchmark index i.e. CRISIL Balanced Fund Index, since information about the latter is not available in public domain.
Volatility
A fund's performance on the Standard Deviation front indicates how successfully it has curtailed volatility in performance. DMBF (Standard Deviation 5.69 per cent) pitches in an impressive showing and outperforms all its peers. ICICI Prudential Balanced (5.87 per cent) comes in second, while Tata Balance (6.57 per cent) fares the worst in the peer group.
Risk-adjusted return
Sharpe Ratio measures the risk-adjusted return i.e. how adequately investors have been compensated for the risk they have been exposed to. Powered by another superlative performance, DMBF (Sharpe Ratio 0.26 per cent) completes its reign of dominance over peers. Tata Balance (0.20 per cent) occupies second position, while ICICI Prudential Balanced (0.12 per cent) lags all the peers.
As can be seen in the graph above, Rs 100 invested in DMBF on inception (May 1999) would have appreciated to Rs 477 at present.
In a nutshell
It can be safely stated that DMBF has succeeded in delivering an impressive showing across the risk and return parameters vis-a-vis peers. The fund's performance is particularly noteworthy in light of the volatile market conditions.
What should investors do?
Now the question is - should investors consider investing in the fund? That would ideally depend on their risk appetite, investment objective and existing portfolio, among a host of other factors. At Personalfn, we have always maintained that a 'one size fits all' approach doesn't work while investing. An investment avenue that is apt for one investor could be grossly unsuitable for another.
Therefore, investors would do well to consult their investment advisors/financial planners to determine the suitability of DMBF in their portfolios.
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