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HDFC Prudence Fund Review

, December 5, 2012, 0 Comments

HDFC Prudence Fund has been a consistent performer in the Balanced Fund category. The scheme aims to provide periodic returns and capital appreciation over long-term from a judicious mix of equity and debt instruments. The debt-equity mix is targeted between 25 : 75 and 40 : 60 respectively in the long-term. The exact mix is decided by many factors like prevailing interest rates, equity valuations, reserves position and risk taking capacity of the portfolio.
So you are planning to start investing in Mutual Funds but don’t know which scheme to invest in? You do some research, talk to your friends and shortlist 5-7 schemes for your portfolio. HDFC Prudence Fund is one of them, but is it a good choice?  Let’s find out.
Started in January 1994, the fund has given annualized returns of 19.92% since launch. With an AUM of more than 6000 crore, the scheme is way ahead from its nearest competitor UTI Mutual Fund who manages an AUM of about 900 crore (approx. 15%). A huge AUM also helps in bringing down the Expense Ratio (1.80%) which makes it one of the cheapest in the market.

The Fund Manager has been consistent with equity allocation irrespective of the market behavior. Since 2006, the equity exposure has never gone below 70%. The heavy equity exposure has helped the scheme to perform outstanding in 2009 when the market turned and can do so in future as well. There have been periods of negative returns in short-term, but over long term the fund manager’s calls have delivered results which are reflected in the comparison sheet below.

It can be seen that over 3 year and 5 year period, the scheme beats both Sensex as well as the Balanced Funds Category Average Returns by a huge margin.

Conclusion

HDFC Prudence Fund is a must have in any investors portfolio. If you don’t have it so far, take exposure of anything between 15 to 30 percent of your total portfolio. If you have it in your portfolio, remain invested but do review scheme performance every 6-12 months.






About author
Dr Naveen J Sirohi is a Ph.D. in Commerce from CCS University and a Certified Financial Planner. Currently he is Assistant Professor (Finance) in the Department of Management at BCIPS, New Delhi. He has more than 10 year of experience including HDFC Bank and Corporation Bank. His domain expertise include Personal Finance, Financial Management, Risk Analysis & Insurance Planning, Retirement Planning, Taxation, Security Analysis & Portfolio Management and Financial Statement Analysis. Dr. Naveen also runs a Consultancy firm, PRUDENT ADVICE, providing Financial Planning services assisting clients achieve financial freedom. ...more