How about investing in Balanced fund?

Conservative investors have often taken fancy to balanced fund whenever the volatility in equity markets have shaken their confidence. Indeed balanced fund with its inherent advantages can be one of the most preferred investment option where an investor can expect to earn better returns than the fixed deposits by exposing themselves to equity in certain ratio. 

Franklin India Pension Plan- G (FIPP-G) , is one fund in the debt oriented balanced fund category that has been an out-performer in the category. The fund managed by Anand Radhakrishnan and Anil Prabhudas with an expense ratio of 2.47 per cent has been a consistent performer over 5 year period. The fund inception date is 31 March 1997 and the average maturity of the fixed income securities invested in by the fund is 16.22 per cent. The Modified duration for the fixed income portfolio stands at 8.12 per cent.  Modified duration is an important measure to be considered by the investors as all other risk factors being equal, bonds with higher duration have greater price volatility when compared to bonds with lower duration. 

The benchmark for FIPP-G is 80 per cent Nifty 500 + 20 per cent CCIL Bond Index. The fund has delivered 8.7 per cent returns over 6 months period. Over 1 year the fund has generated 8.1 per cent.  2 year returns stand at 15.1 per cent on annualised basis whereas the returns are 15 per cent on a 3 year basis. For a longer 5 year period the returns generated by the fund stand at 12.37 per cent. 

The Alpha for the fund is 2.89 per cent and the Sharpe ratio is 1.57 indicating superior performance of the fund. The fund has parked majority of the funds in G-Sec securities and has exposure in Metal & Minings (21.8 per cent), Financials (19.7 per cent), IT (4.2 per cent) and consumer durable (3.3 per cent). 

Investor concerned about market valuation and excess volatility on equity markets may look at options of investing in debt oriented balanced funds for acceptable volatility and higher returns compared to a fixed deposit.