Returns on equity for the last few months have been very unstable. Most of the financial advisors are endorsing their clients to go for balanced funds. Balanced funds are outstanding options for investment for investors having moderate risk appetite, as they could provide great returns for investors having restricted downside risks. One of the prime advantages of balanced funds is that the capital gains taxation. From the taxation point of view, balanced funds having equity allocation of 65 percent or much higher allocation are treated is equal parlance as equity funds. Long terms capital gains and dividends are free from taxation for those funds. Today, there are number of balanced fund schemes, the ICICI Prudential Balanced Advantage fund is one of the ideal investment tool for investors having moderate risk tolerance, as the fund is having a conservative risk profile as compared to other balanced fund schemes.
Presently, the fund allocates 65 percent to equity. The risk adjusted performance of the fund has been robust over last few years. The Assets under Management (AUM) of the fund has increased 200 percent over the last one year.
The fund has an in-house model which takes into account long-term horizon, historical mean P/BV (Price to Book Value), limiting the risk of downside in case of market fall, with a view of recording profits during rising market. The fund is flexible enough as it hedges its equity positions with derivatives, and it also takes derivative positions in index.
The fund has an assortment of large and mid-cap stocks and it continuously has hefty amount of large caps since the valuation difference makes the large cap stocks attractive as compared to mid-caps. Though the large cap signifies well profound enterprises which are chosen from top 100 stocks as per market capitalization, mid-caps represents smaller entities which are having potential for growth in the long-term. This allocation is based on tactical analysis and not on pre-defined ratios.
ICICI Prudential Balanced Advantage fund has a proven track record of defeating its own set benchmark every time on annual return basis for recent 5 years. Even though, the fund took a hit in the year 2008, the greater cash equity position of the fund at the start of the year caused a bit of damage. However, it was able to manage the falling market in the year 2011 in a better manner; the fall was by 8.7% whereas the benchmark set for the fall was over 14%.
If an individual would have started a monthly Rs. 10,000 SIP with ICICI Prudential Balanced Advantage 5 years ago, the individual would have received an attractive amount of Rs. 9.35 lakh by today. That corresponds to return of 18% annual return. On the other hand the benchmark, Crisil Balanced Fund Index, would have provided the individual just Rs. 8.1 lakh; with an IRR of 12 % per annum.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.