A discussion on the CRISIL Balanced fund: Aggressive Index a benchmark for equity-oriented balanced funds. Balanced mutual funds hold a minimum of 65-70% Indian equity or equity related instruments at all times to be classified as an equity mutual fund by the Taxman.
The most commonly used benchmark for such funds is the CRISIL Balanced fund: Aggressive Index. Unfortunately, each CRISILindex cost a few lakhs and is not available in the public domain. In this post, I use annual return (financial year) returns obtained from JM Fund house fact sheets to compare it with the performance of balanced mutual funds.
Composition of Crisil Balanced Fund Aggressive Index
Nifty 50 index - 65%
CRISIL Composite Bond Fund Index - 35%
The CRISIL Composite Bond Fund Index itself consists of
- CRISIL Gilt Index 50%
- CRISIL AAA Long Term Bond Index 20%
- CRISIL AAA Medium Term Bond Index 12%
- CRISIL AAA Short Term Bond Index 6%
- CRISIL AA Long Term Bond Index 5%
- CRISIL AA Medium Term Bond Index 3%
- CRISIL AA Short Term Bond Index 4%
The way I see it, an equity-oriented balanced fund is an equity fund. Therefore, I would expect it to beat the Nifty TRI on a risk-adjusted basis and not just the Crisil Balanced fund.
Readers may recall that I earlier published the downside Capture Ratio of all Mid-cap Equity Mutual Funds and then followed it up with
Mutual Fund Screening with Downside and Upside Capture Ratios
I have now repeated the excercise with Balanced funds with NIfty TRI as the benchmark and comapared the FY returns with Crisil balanced index.
All the above funds have beat the Nifty TRI Index for 1,2,3,...9Y SIPs. This justifies my opinion that balanced mutual funds should be treated as 100% equity mutual funds.
Read more: Balanced Equity Funds: the low risk, high reward option
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Thanks for the post Pattu.
Something is not right with the DHFL data (23% SIP returns for 9yrs and such), and that you might want to check on.
The conclusion remains same however - hail the balanced funds 🙂
And since, you are delving deeper into the Balanced Funds topic:
1. Is there a way to segregate the equity and debt portion performance of a fund and compare two funds based on it?
2. In general, and as the returns of a balanced fund is also a function of the equity and debt re-balancing - how to get data and analyze - the kind off and the frequency of re-balancing that is done and its role in contributing to the overall returns of a particular fund? The rationale is to figure out - if this parameter matters, and if yes, to what extent.
Thanks
Yes that is a mistake. Mentioned it in the legend. Thank you. As reg your other points:
1. Is there a way to segregate the equity and debt portion performance of a fund and compare two funds based on it?
2. Effect of rebalancing.
Not easy, not impossible either, but imo wont help much. Happy to treat them as pure equity funds and go any deeper.
Thank you.
Well, imo having a clear picture on both the counts would increase the comfort level in maintaining an entire retirement portfolio 🙂
The seminal questions is, can we maintain the debt part of an individual portfolio as well in the balanced fund's debt part?
VERY NICE ARTICLE ABOUT BALANCED FUNDS
THANQ
Thank you
Both ICICI Pru Child Care Plan and HDFC Children Gift Fund listed are debt oriented hybrid funds (aka MIP funds) not balanced funds (which are equity-oriented by definition).
ICICI Prudential Child Care Plan - Gift Plan is eq oriented. The study plan is what you are referring to. Same with the HDFC fund plans.
Hello Sir,
In your example table, the 3 rd fund DHFL pramerica blanced fund has huge difference with peers. It has given 20+% returns in all 9 SIPs. Is it true? What could be the reason for such a huge return?
Regards,
Vishnu
Where can I download the historical data from for this index?
It is not available for free.