DSP BR Balanced Fund: Sell:: Business Line

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The fund’s recent performance places it almost at the bottom of the ranking when compared to peers.

DSP BR Balanced Fund, which splits its portfolio between equities and debt, has been floundering over the past few years. Its year-to-date returns lag its benchmark CRISIL Balanced Fund by around 10 percentage points. Its one- and three-year returns are also well behind the benchmark as well as the category average. In the five-year period, it managed to equal the benchmark’s returns, but still lags the category average.

While the fund has a long history of good performance — its ten-year returns beat the benchmark by a good 4 percentage points — it has not been able to manage the ups and downs of the year so far nor been able to contain losses in the 2011 slide.

LAGS PEERS

Among equity-oriented balanced funds, DSP BR Balanced falls in the bottom quartile in the one- and three-year period, and in the mid-quartile in the five-year period. Investors can sell their holdings in the fund based on its poor performance.

The fund puts 65-75 per cent of its portfolio into equities with the remaining in debt, but has averaged at around a 70-30 ratio in the past five years.

DISMAL PICTURE

In the one- and three-year time-frame, the fund has lagged CRISIL Balanced by four to six percentage points. The dismal returns picture in these as well as the five-year periods is in part due to a bad performance in 2011 and in the year-to-date. In these two periods, the fund’s returns were behind the CRISIL Balanced Index by three to ten percentage points.

In the past year, the fund’s low holding in defensives impacted performance. Similarly, bets on stocks such as SKS Microfinance, Tata Steel, Hindalco, and other capital goods and infrastructure stocks hurt in 2011. The fund did do well in the two previous market rallies of 2012 and 2009-10, sprinting far ahead of the benchmark.

But on an annual rolling returns basis in the past five years, the fund has done better than its benchmark just about half the time, which is hardly a satisfactory performance.

PORTFOLIO

The fund has not invested heavily in pharmaceuticals and FMCG in the past year, trimming FMCG holding well ahead of time in mid-2012. The fund also took bets on stocks such as Aditya Birla Nuvo, Reliance Industries and Dr Reddys Labs which have had an uneven time, while those such as Larsen & Toubro didn’t do well. It did get some sector calls right though, trimming bank and financial holdings early this year, while adding software and telecom stocks.

On the debt side, the fund took a timely call and exited gilts in June this year. That has brought down average maturity of its debt profile to less than a year. The fund has raised holding in the CBLO market instead, besides holding AA and AAA rated debentures from Power Finance Corp. and LIC Housing Finance.