What is the investment objective of ICICI Prudential Balanced fund?
ICICI Prudential Balanced Fund aims to generate long-term capital appreciation and income from a portfolio that is invested in equity, equity-related securities, and fixed income securities.

What is the technique followed to manage the equity–debt balance in this fund?
The fund maintains a minimum of 65 per cent to a maximum of 80 per cent exposure to equity while the remaining is kept in debt. The equity levels in the range of 65-80 per cent are determined using an in-house Price to Book Value (P/BV) model in which current market levels are compared to the fair value range to determine under or over valuation of the market. A lower P/BV than the fair value range triggers an increase in equity levels and vice versa. The rebalancing of equity portion takes place on a weekly basis.

What is the investment universe of the fund?
The scheme looks at a blend of large- and mid-cap stocks. While the large-cap stocks represent established enterprises with a good track record, the mid-caps are smaller businesses with long-term growth potential. It proposes to concentrate on business and economic fundamentals driven by in-depth fundamental research. The scheme seeks to actively manage the debt portion based on the view of the debt market with an aim to benefit from changing interest rate cycles. It also invests in fixed income securities, which offer reasonable accrual with credit rating AA and above and tactical allocation to longer maturity papers.

What stocks do you generally avoid and which ones do you prefer?
The funds have a stock universe across market capitalisations. However, the conservative nature of investors is kept in mind while constructing the portfolio. Hence, we do not take any aggressive calls on any leveraged sector or companies. We tend to avoid companies with high valuations. Using bottom-up, we pick up stocks with long-term perspective. We also assign very high weightage to corporate governance standards of the companies where we are invested and how they treat minority shareholders.

What has aided in the fund’s superior performance in the recent years?
Over the years, ICICI Prudential Balanced Fund has maintained a buy and hold strategy for quality stocks. Also, avoidance of over-leveraged and expensive names has helped the performance of the fund.

olmdesk@outlookindia.com