Despite positive returns from equity markets in the last few months, balanced funds have managed to give strong returns held thier own over Monthly Income Plans (MIP), debt and even large-cap equity peers last fiscal, riding on interest rate cuts and continued firmness in equities. The latest Crisil report says that, Crisil–Amfi Balance Fund Performance Index gave a return of 37.17% in 2014-15 compared with 20.92% by monthly income plans (Crisil–Amfi MIP Fund Performance Index) and 12.47% by debt (Crisil–Amfi Debt Fund Performance Index).
Balanced funds usually invest in mix of equity and debt and several funds even have aggressive equity component which can generate extra returns for the investors.
Balanced category also outperformed the Crisil–Amfi Large Cap Fund Performance Index in most time horizons considered. The Crisil–Amfi Large Cap Fund Performance Index gave a return of 34.61% in 2014-15. The latest Crisil report also says that, “These funds typically invest over 65% of their corpus in equity and the remaining in debt and cash, which allows them to tap run-ups in either category.”
Many financial planners and distributors suggest that beginners start investing in mutual funds through balanced mutual funds as they are less volatile compared to other equity diversified equity schemes. In the last few months, having debt exposure has also helped balanced funds deliver positive returns.
“On the debt side, the yield on the 10-year gilt securities fell over 100 basis points last fiscal. A portfolio analysis of Crisil ranked balanced funds shows funds increased their gilt exposure to 13% on average last fiscal, compared with 8% in FY14, thereby benefitting from interest rate fall,” concluded the report.
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