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Three funds for double-digit

returns
(Article from Business line published on 17 th January 2015)

Presented by
Vishnu Sankar S

Advisors usually tell investors that if they


want to enjoy double-digit returns, they
should take the wild swings of the stock
market in their stride.
But given that equity and balanced funds
have suffered 40-50 per cent losses in bear
markets such as 2008, this is easier said
than done.
So, are there funds which can get you a
double-digit return over three or five years,
without wiping out half of your capital if the
stock market tanks?

HDFC Multiple Yield Fund


Investment Objective :
The scheme aims to generate positive returns over medium time
frame with low risk of capital loss, by investing primarily in fixed
income securities and balance in equity and equity related
instruments.

Asset allocation (%)

0.76
23.32

75.92

Equity
Debt
Cash & Cash
Eq.

In the bear market of 2008, when the average balanced fund lost over
40 per cent in value, HDFC Multiple Yield suffered just a 3 per cent fall
in its NAV.
In 2010 and 2011, which were not-so-great years for debt funds, HDFC
Multiple Yield still managed returns of 11 and 6 per cent, respectively.
The fund has had only one down year since its launch in late 2004 a
good bet for conservative investors looking for a double-digit return.

Franklin India Pension Plan


Investment Objective:
The scheme seeks to generate steady returns along with tax
savings through a portfolio of upto 40% in equities with the balance
invested in fixed income instruments. This is to ensure relative
stability and deliver superior returns.

Asset Allocation (%)

3.34
38.47
58.19

Equity
Debt
Cash & Cash
Eq.

Though low on credit risk, the debt portion features a fairly long
duration (8.5 years in end November 2014), which increases
interest rate risk but may enable it to make the most of a falling
rate scenario.
The fund now sports a one-year return of 35 per cent, three-year
return of 18 per cent and a five-year return of 12 per cent, ahead of
the balanced fund category, despite a much lower risk profile. It has
suffered two years of losses in the last 10 years, with a 24 per cent
fall in its NAV in the bear market of 2008. Investments in the fund
carry a three-year lock-in period and are eligible for section 80C tax

ICICI Pru Balanced


Advantage
Investment Objective:
The scheme seeks to provide capital appreciation and
income distribution to the investors by using equity
derivatives strategies, arbitrage opportunities and pure
equity investments.
Asset Allocation (%)

Equity
Debt
Cash & Cash Eq

34.9
65.1

This fund normally invests up to 35 per cent of its portfolio in debt


investments and 65 per cent in equities. But risks in the equity
portfolio are contained through two strategies.

The equity portion is made up both of direct stock holdings and


arbitrage bets (which yield debt-like returns). Apart from this, the
fund adjusts its direct equity exposure based on whether overall
market valuations are expensive or cheap. If the markets price-tobook value ratio is low (based on historical bands), the fund raises
its direct stock holdings and relies less on arbitrage. If market
valuations are high, direct equity is cut to 30 per cent, with the
fund betting more on arbitrage opportunities.

The fund has managed one-year returns of 30 per cent, three-year


returns of 24 per cent and five-year returns of 15 per cent. Returns
took a wallop during the 2008 market slide, with the NAV declining
37 per cent.

But the fine-tuning of the asset allocation strategy after that has

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