The latest newsletter from DSP Mutual Fund fails to give much details about this particular scheme. The newsletter states that as on September 30, 1999, the fund had invested 66.59 per cent of net assets in equities. DSP Merrill Lynch Fund manages assets to the tune of Rs 1,000 crore and the Balanced Fund has a size of Rs 133.45 crore.

The balanced funds from Prudential ICICI and Birla Mutual Fund have their NAVs which are almost at par with that of DSP Balanced Fund. As on November 15, 1999, the NAV of Prudential ICICI Balance stood at Rs 9.83 and Birla Balance Fund's NAV was Rs 10.26.

It is important to note that both these funds have launched their funds when the Sensex was at 3900 unlike DSP Balanced Fund.

Few of the arguments for the under-performance of DSP Balanced Fund is that it is not prudent to compare a balanced fund with the Sensex as a certain amount of funds is parked in debt. In the case of DSP, the balanced fund has an equity allocation of 66.59 per cent and the rest is debt. Since the majority of investments is in equity, while analysing the scheme, 60 per cent of the NAV was compared with the index and the rest with a debt instrument that gives a return of around 12 per cent. While one can see that compared to a debt instrument, the NAV of DSP Balanced Fund has done very well and the same cannot be true for the equity portion.

A good reason for the under-performance is the fact that 10.20 per cent of the assets are invested in FMCG and 10.49 per cent in engineering. Both these segments have not moved up at all in the current rally. It is interesting to note that there is no HLL in the portfolio in spite of the high exposure to this sector.

Another good reason could be the fact that the fund managers do not want to bet on a particular scrip and they rather have their portfolio diversified. And that could be the reason that other funds who ride on one or two scrips do better than others. Though this may be true, one just cannot justify the fact that the NAV has through out under-performed the Sensex. Like one fund manager loves to say `what does the investor want - returns or low standard deviations?

Incidentally, DSP Balanced Fund has a standard deviation of 1.11 as compared to 1.62 for the Sensex. Certainly, doing better than the Sensex when risks are considered.

The fund can always justify the fact that they are looking at the long-term investor and would like to take the stride very slow. But will the investor stay with `the 100 per cent money manager'?