Fund of Fortnight

Union Balanced Advantage Fund - Direct Plan

Reason for recommendation
Over the past few months, especially after the invasion of Ukraine by Russia, both the equity and debt markets have seen a sell-off. Both assets have generated negative returns in this period and cash seems to be the king now. Hence, in such a volatile condition, investing in a fund that has a high cash component would be the right choice. It should have the mandate to invest in either of the categories. Therefore, there can be nothing better than balanced advantage funds that can invest in both debt and equity depending on the market condition. In this category we have zeroed in on the Union Balanced Advantage Fund. 

As per its latest available asset allocation as on May 2022, 43 per cent is in equity, 16 per cent in debt and the remaining 41 per cent in cash and equivalents. As can be seen, cash holding is on the higher side. Historically though, this fund has never taken a cash call. The cash component has increased in the last few months. Therefore, we can safely believe that sooner or later this cash would be deployed to the appropriate asset class. Looking at its equity exposure, it holds around 69 stocks with top 10 holdings forming 37 per cent while the top three sectors form 26 per cent of the total assets. 

This makes this fund less prone to concentration risk. Looking at its portfolio, it invests in stocks like HDFC Bank, Reliance Industries, ICICI Bank and Infosys, among others, which shows it is biased towards Large-Caps. As against Mid-Cap and Small-Cap stocks, large-cap stocks fall less and start recovering faster. As regards the portfolio’s debt side, it is overweight on AAA rated bonds and A+ rated bonds. It has been investing towards the shorter end of the yield curve, which cushions it from the rising interest rate. This fund is suitable for conservative investors who want to invest through the SIP route.