Funds To Help Build A Defensive Portfolio


Nisreen Mamaji: So, see typically right now, because of the geopolitical unrest and the spiralling inflation in developed countries, this has had an adverse effect on our equity markets. Having said that, you can be in equities if your period is longer and as I just said, this lady is interested in investing for about five years. So, we have a couple of strategies that we suggest.

One is the dynamic asset allocation category, which I think that Juzer has already aptly explained. So, besides HDFC, which has an equity component of about 68% right now. We are also recommending the ‘Nippon Balanced Advantage Fund’, which has an equity of 41%, debt of 30% and arbitrage of about 29%. A one-year returns of the entire BAF (balanced advantage fund) category hasn’t been good. But if you look at about the three-year category, this is delivered about 11.13% and a five-year CAGR is about 8.5% for Nippon, but in the last one year because of the lack of opportunities in the arbitrage segment as well, the entire BAF category hasn’t performed well.

So, another also a good option for the dynamic asset allocation category would be like an asset allocator fund of funds. So, we are recommending the ‘ICICI Pru Asset Allocator’ which is invested 30% in equity and 58% in debt. So that also gives us a very good, you know, option because it has gold of about 12% as well. So, these three investment category options would ensure that the return expectations are met.

In the last one year again, the CAGR in six-months has been about 2.6%, one-year is 4.3%, three-years is 12.8% and the five-year category is about nearly averaging 11%. But this asset allocator would have a debt taxation because it belongs to the fund of funds category, so you know automatically you will be invested for three years, and you will have the benefits of indexation.

Another interesting category is a multi-asset category, which will include perhaps international equities, it could include gold, it could include rights, there you know, we are recommending the ‘HDFC Multi Asset Fund’, currently the position is about 55% in equities, 12.5% in debt, arbitrage is 12.5% and 11% gold.  So, this will give you exposure to various asset classes and therefore for the defensive strategy you are not dependent entirely on one asset class, which you know would be risky at this point of time.

Now, as you said her tenure is little longer, then there we can also recommend certain defensive strategies and equities itself. A value strategy is very much in favour right now because in this kind of a situation the value categories, you know, in the next couple of years we expect it to perform well, also, we can get defensive category like an FMCG or a dividend deal category.

So, in dividend deal, we recommend ‘ICICI Pru Dividend Deal’ and in FMCG also we are recommending the ‘ICICI Pru’ where returns have been in the top five. So, if your tenure is longer, you can look at 100% equities and the defensive sectors would be what I mentioned earlier.


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