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Recommended Portfolios for 2014
March 5, 2014

A brief update on Recommended Portfolios 2014.


Author : Dr. Renu Pothen



Changes in Recommended Portfolios         

The release of Recommended Funds is normally followed by the publication of model portfolios, which is eagerly awaited by our Investors and Associates. This is because although our recommended funds are in the range of 50-60, not all of them will make it to our portfolios. Our model portfolios were created for the first time on February 26, 2010 and we assumed that each portfolio would have a surplus of INR 1 Lakh. We usually revamp our portfolios only under 2 scenarios:

  1. When our views on the Indian markets change, that is if we take a Under-Weight/Neutral/Over-Weight stance on the country.
  2. Whenever there is a change in our Recommended Funds, our portfolios will also reflect the same.

In line with our tradition, we are realigning our model portfolios this year based on the changes that have happened in our Recommended Funds list.

Table 1: Portfolio Fund Allocation Changes

  Target Asset Allocation with effect from 3rd March 2014
Asset Allocation Fund Name Conservative Moderately Conservative Balanced Moderately Aggressive Aggressive Moderately Aggressive (Global) Aggressive (Global)
  DEBT
Ultra Short Term Funds Templeton India Ultra Short Bond Fund  15 10 10 5 - 5 -
Short Term Funds PineBridge India Short Term Fund 40 35 20 - - - -
Reliance Regular Savings Fund- Debt Option 10 10 10 - - - -
UTI Short Term Income  Fund - - - 10 5 10 5
Income Funds Canara Robeco Income  - - - 15 5 15 5
Dynamic Bond Funds BSL Dynamic Bond Fund 25 15 10 - - - -
  EQUITY
Large Cap Funds BSL Frontline Equity Fund - - - 10 15 5 10
ICICI Prudential Focused Bluechip Equity Fund 5 10 15 - - - -
Multicap Funds Axis Equity Fund - - 10 10 10 - -
Mirae Asset India Opportunities Fund - - - 10 10 5 10
UTI Opportunities Fund - 10 15 - - - -
Midcap & Small Cap Funds SBI Emerging  Business Fund - - - 15 20 15 15
Dividend Yield Funds Tata Dividend Yield Fund 5 10 10 - - - -
Contra & Value ICICI Prudential Discovery Fund - - - 15 20 10 10
Infrastructure Funds PineBridge Infrastructure & Economic Reform Fund - - - - 5 - 5
Banking & Financial Funds ICICI Prudential Banking & Financial Services Fund - - - 10 10 10 10
Global Funds JP Morgan Greater China Equity Off Shore Fund - - - - - 10 15
L&T Global Real Assets Fund - - - - - 15 15

Changes made in the Portfolios

One of the changes that have been made on the Fixed Income side is the inclusion of Reliance Regular Savings Fund-Debt Option in our conservative, moderately conservative and balanced portfolios. Although the fund follows an accrual strategy and takes an exposure into yield enhancing credit, we are positioning this fund for our risk averse investors as a vehicle to generate alpha in their portfolios. In addition to this, in the short term space, we have decided to recommend PineBridge India Short Term Fund only in the conservative, moderately conservative and balanced portfolios. Last year, we had included this fund in all our portfolios; however, this year we thought it appropriate to remove the same from our moderately aggressive and aggressive portfolios. This is because the fund being conservative in nature (with respect to the credit quality of the instruments) was not able to match the expectations of our aggressive investors. However, it should be noted here that whenever the debt market goes through a volatile phase, this fund turns out to be the best performer and hence only investors who are ready for a trade-off between risk and returns should go ahead with this fund. For our moderately aggressive and aggressive portfolios, we have decided to take an exposure into UTI Short Term Income Fund, which as per our analysis has more than 70% of the portfolio concentrated into AAA, A1+ and AA+ Instruments.

In the equity space, the only addition this year is Axis Equity Fund which has been recommended to our balanced, moderately aggressive and aggressive investors. A relatively new fund in the multi cap space, whose investment strategy is to invest across the market capitalization spectrum, it turns out to be a promising fund. All the other changes that have been made are on account of the modifications made in our Recommended Funds this year.

Table2: New Fund Additions and Old Fund Deletions

Changes in scheme 
Category Old New
Short Term Funds - UTI Short Term Income Fund
- Reliance Regular Savings Fund-Debt Option
Income Funds Templeton India Income Builder Account -
Large Cap funds DSP BlackRock Top 100 Equity Fund BSL Frontline Equity Fund
Multi cap Funds  - Axis Equity Fund
Dividend Yield Funds BSL Dividend Yield Plus Tata Dividend Yield Fund
Banking & Financial Funds Reliance Banking Fund ICICI Prudential Banking & Financial Services Fund
Global Funds Franklin Asian Equity  L&T Global Real Assets Fund

Conclusion

We have rebalanced our portfolios on March 3, 2014. Our Factsheets will reflect the same, next month onwards. A word of caution to all our investors and associates who religiously follow our model portfolios: These portfolios are only revamped in the two instances that I have mentioned in the beginning of this note. Hence, if our views on any asset classes change, then we will update the same, either through a separate note or in the Monthly Market Update. Hence my advice is that before you recommend the model portfolios to your investors please check our views on the different categories of funds and customize a portfolio depending on their risk profile and time horizon.

Happy Investing!

Please feel free to get back to us on research.ind@ifastfinancial.com if you have any queries on any of our funds.


iFAST and/or its content and research team’s licensed representatives may own or have positions in the mutual funds of any of the Asset Management Company mentioned or referred to in the article, and may from time to time add or dispose of, or be materially interested in any such. This article is not to be construed as an offer or solicitation for the subscription, purchase or sale of any mutual fund. No investment decision should be taken without first viewing a mutual fund's offer document/scheme additional information/scheme information document. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Investors should seek for professional investment, tax, and legal advice before making an investment or any other decision. Past performance and any forecast is not necessarily indicative of the future or likely performance of the mutual fund. The value of mutual funds and the income from them may fall as well as rise. Opinions expressed herein are subject to change without notice. Please read our disclaimer in the website.

 



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