Being an investor in HDFC Balanced Fund, I have the following concerns which I would like you to throw light on:
- It has a good track record so far and I still don't understand what is the strategy of the fund house to kill this excellent fund
- Its expense ratio was very less than what they are now charging for the new Hybrid fund
- The fund manager, Chirag was managing it excellently and now he has to work with an underperforming fund manager
- Ramakrishna
Should I invest in HDFC Balanced Advantage for a 3-year horizon? Is it safe compared to a plain balanced fund?
- Rakesh Pandey
For obvious reasons, we have attempted to answer both queries together.
Let’s first get the perspective on the recategorization of HDFC Balanced Fund in the current scenario. With the recent realignment of funds as per SEBI guidelines, HDFC Premier Multicap Fund has been merged with HDFC Balanced Fund and the entity thus formed is named as HDFC Hybrid Equity Fund.
The fund house has retained the features of HDFC Balanced Fund in HDFC Hybrid Equity Fund and categorised it under Aggressive Hybrid Fund. This category mandates the manager to invest between 65-80% of assets in equities and between 20-35% of assets in fixed income instruments, which is not different from the way HDFC Balanced Fund has been historically managed.
Simply put, HDFC Hybrid Equity Fund will be managed in the similar fashion as the erstwhile HDFC Balanced Fund. So, you can be rest assured, this product is not getting killed.
The fund would continue to be managed by Chirag Setalvad which should alleviate your concern on the manager part.
While the expense ratio of HDFC Hybrid Equity Fund is yet to be disclosed as the date for these changes to be effective was June 1, 2018, we believe it won’t be dramatically different from what the fund house used to charge for HDFC Balanced Fund.
- HDFC Balanced Advantage Fund
HDFC Balanced Advantage is an amalgamation of HDFC Growth and HDFC Prudence and it has been categorized under Balanced Advantage category. Under this category, the fund has the liberty to move dynamically between equity and debt segments without any restrictions or limits.
Historically HDFC Prudence has been managed as a balanced fund with roughly 75% of allocation maintained in equities across time periods. Hypothetically, the fund manager may continue to manage HDFC Balanced Advantage in similar fashion going ahead. If that’s the case, then your investment horizon is too short to invest in this fund or for that matter any equity-oriented funds. Its prudent to invest in equity-oriented funds for an investment horizon of 5 years and beyond.
Before investing you should get an understanding of the fund’s investment strategy, how it is being managed and whether it fits your requirement. For instance, HDFC Prudence was an aggressively run balanced fund and used to court more risk than a typical category peer.
It would be wise to get the help of an investment adviser who would help you select the right fund in your portfolio based on your investment objective and risk appetite.
Read More
