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.