Birla Mutual Fund has just opened their balanced fund scheme, which is reportedly getting a good response, while Prudential ICICI has also announced its scheme. Many other players are considering launching such a scheme. Alliance, JM Mutual are some mutual funds which have balanced funds in their product portfolio.

What seems to have triggered this move by the mutual funds is the fact that investors who were till recently contended in investing only in their debt schemes are now showing interest in equity markets. Fiscal incentives in the form of tax-free dividend and the consistency shown by the market, of late, are some of thereasons attributed for change in the perception of the investors. But they are still not willing to put their money in full in equity schemes.

It is these investors who mutual funds are planning to tap through a balanced fund. They want to position this scheme as an ideal stepthrough for investors' ultimate graduation into equity scheme at a later date when their confidence level improves suitably.

"Balanced funds are stepping stone for investors to equity funds and is the best way to get the conservative investors to taste the benefits of equity,'' says Vivek Reddy, chief executive of Kothari Pioneer Mutual Fund (KPMF). In a hot equity market, balanced funds have a reduced downside, he said, while adding that KPMF was considering the launch of a balanced fund scheme.

Chief investment officer and CEO of ITC Threadneedle, Simon Holdsworth says that the investment in high-quality debt papers have a stabilising influence on the balanced fund and thereby increase the comfort levels of the investors. Thatplus the tax incentives make balanced funds a very attractive long term investment vehicle, he said.

TP Raman, MD, Sundaram Newton AMC opined that with the market beginning to look good, investors are beginning to split their investments between equity and debt schemes. A balanced fund would save them that difficulty.