Is it unusual that two of India’s top five equity-oriented funds are balanced funds? HDFC Prudence Fund (HPF) is India’s largest equity-oriented fund with assets under management (AUM) of Rs31,717 crore, as of September 2017. ICICI Prudential Balanced Fund (IPBF) packs an AUM of Rs19,601 crore. The question we ask is: are investors smart to choose a lower-risk route to equity exposure through a balanced fund, or is there some other story playing out?
If the reason is that investors made a smart choice, then balanced funds of all fund houses would be among the largest. But only six of the 40 fund houses have their balanced funds larger than their other equity funds. Could it be that the performance of these two balanced funds is so much better than the category average, that investors are choosing performance? However, HPF and IPBF have given satisfactory returns, not stellar performances. Balanced funds of L&T Asset Management Co. (AMC) Ltd and HDFC Asset Management Co. Ltd’s other balanced fund have done just as well and even better at times than these two largest balanced funds over the past 5 years; IPBF didn’t even finish 2017 in the top quintile.
