DSP Merrill Lynch Balanced Fund
Investment Objective: DSP Merrill Lynch Balanced Fund
Fund manager: Anup Maheshwari |
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Profile |
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DSP Merrill Lynch Balanced Fund (DMLBF) was launched in May 1999 when the BSE Sensex was a little below 4,000 points and the tech bull run was picking up steam. After that, the Sensex saw levels of over 5,800 (February 2000). But this growth was quickly shaved off once the tech boom fizzled out and investors in the growth option now find their NAVs below par, which means that they haven't really been rewarded for sticking with the fund since inception. However, investors in the dividend option have been luckier after collecting Rs 1.40 in March 2000. The fund's woes can be attributed largely to its tech-heavy holding in the tech boom and ignoring the old economy until it was too late.
As on 31st August 2001, the fund's net assets under management amounted to Rs. 625 m.
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| Is this fund for you? |
Entry load: Nil
Exit load: Nil
Risk: Medium
Return: Medium
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For a balanced fund DMLBF was positioned a little too aggressively which served its purpose for a while in early 2000, but its been a downhill journey since then. Of late, the fund has corrected this by lowering TMT (technology, media, telecom) exposure. Investment in the fund is recommended for investors with some appetite for risk, although being a balanced fund, its risk profile is lower than that of a pure equity fund. Investors who are adequately invested in fixed income securities/mutual funds can also consider investment in the fund to boost returns. However, investors above 40 years should avoid investing in it and should look at income funds instead for stability and growth.
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| Performance Analyses |
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Portfolio Strategy
Sectoral allocation
Equity Portfolio
As per the fund's latest fact sheet (August 31, 2001) DMLBF has about 10% of its net assets in software and 4% in telecom - making that 14% exposure to TMT (telecom, media, telecom). The fund has 9% allocation to the fast moving consumer goods (FMCG) sector, which is underweight when we compare it to its peers and the index. It has 9% exposure to pharma, 7% exposure to oil, 7% to diversified. The fund is diversified across sectors without undue exposure to any one sector which is a departure from its strategy in the tech boom heydays, when TMT accounted for a large chunk of the portfolio.
Fixed Income Portfolio
DMLBF has just under 38% fixed income exposure. However, as equity markets face one of the worst slumps ever and signs of a rebound begin to look distant, going forward the fund may increase the fixed income component to preserve capital. The fund has two bonds (both AAA) accounting for about 17% and GOI 2004 accounting for about 9%. The fund has 12% in call and receivables.
Company allocation
The fund has less than 30 companies in its portfolio, which is a fair number given its size. The stocks are large cap and liquid (Infosys, ITC, Hindustan Lever, Cipla, Reliance, Grasim, L&T, Digital Glob., BPCL, Tata Power). Moreover, these companies are leaders in their respective sectors and with a rebound in the sectoral fortunes, the fund will benefit significantly.
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| Outlook |
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DMLBF continues to rely on the software sector for growth although to a lower extent (as compared to before). Given its inclination towards the sector in the past, it is possible that the fund will increase exposure to the sector if its sees increased growth opportunities. While it is true that the software sector continues to hold promise especially since stocks are attractively priced, this will infuse higher volatility in the fund. In addition to software, the fund will also rely on FMCG, oil and pharma sectors. These sectors will have a stabilising influence in the fund's portfolio. Investors must understand these factors before investing in the fund.
Entry in the fund must be considered with a minimum 24-month investment horizon.
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