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HDFC Prudence Fund

The Housing Development and Finance Corporation, HDFC has grown over the years to expand its operations in banking, insurance, and asset management sector. HDFC Mutual Fund has launched HDFC Prudence Fund to balance the risk of equity investments with the dependable performance offered by the debt instrument. HDFC Mutual Fund manages a number of mutual funds ranging from equity to liquid funds and provides portfolio management services to investors.

Among its many products, the HDFC Prudence Fund is one of the leading aggressive hybrid mutual funds in the country. Hybrid mutual funds are also known as balanced funds or balanced mutual funds. They are a unique range of funds that help to balance risk and potential growth of equity instruments with a steady performance offered by debt instruments. In case of HDFC prudence Fund, this scheme has been merged with HDFC Balanced Advantage Fund and the investments made are diversified from large-cap equity instruments to the extremely safe government securities. These provide regular income, growth, and a minimum level of risk. HDFC Hybrid Funds are an excellent diversification tool for an investment portfolio as they provide a unique balance of return and risk to the investor.

Plans and options available under HDFC Prudence Fund

  • Direct plan: Under HDFC Prudence Fund-Direct Plan, investors can invest into this mutual fund directly through HDFC Mutual Fund. In case of direct plan, investors are putting their money directly with the fund house without involving the distributors. This means investors can enjoy 100% benefits of their investment. The NAV of the direct plan is usually higher than the regular plan.
  • Regular plan: In case of the regular plan option, the investors purchase the mutual fund units through a distributor or third-party broker. Hence, there are higher portfolio management fees due to factors like distribution charges, brokerage charges, etc.
  • Dividend option: A dividend option allows the investors to receive dividend payouts on their investment, whenever the scheme declares a dividend payout. In the case of dividend option, investors can opt for dividend payout or dividend reinvest. In the case of dividend reinvest option, investors are allowed to obtain additional units equal to the value of dividend earned or the payout is made to the investor’s linked bank account. The dividend option is available for both regular and direct plans.
  • Growth option: In case of growth option, the profits earned by the mutual fund are invested into the fund to enable further growth of the investment. Such growth, over a period of time, increases the NAV as no interim payments are made to the investors. The growth option is available for both regular and direct plans of HDFC Prudence Fund.

Statistics of HDFC Prudence Fund

  • Launch date: The HDFC prudence fund regular plan was launched on February 1st, 1994.
  • Fund type: HDFC Prudence Fund is an open-ended hybrid fund in which investors can invest in or exit the scheme at any time. Being a hybrid fund, the HDFC Prudence Fund’s debt investment allocation ranges from 25% to 40%, whereas the equity investment ranges from 60% to 75%.
  • Minimum investment: The minimum amount for the first purchase in the HDFC Prudence Fund is Rs. 5000, while the minimum amount for additional purchase is Rs. 1000.
  • Risk category: The HDFC Prudence Fund aims to balance the risk of equity exposure with the investment in debt funds, which perform consistently and provides the option of generating a regular income when there is a bull run. Due to its exposure to both debt and equity investment and changes in asset allocation as per the market conditions, HDFC Prudence Fund is classified as a moderate high-risk investment instrument.
  • Exit load: HDFC Prudence Fund allows investors to switch out or liquidate up to 15% of the units bought without any exit load. Otherwise, 1% exit load is chargeable on the units being switched or redeemed before completing one year from the date of the initial investment made. Exit load is not applicable in case investors switch the fund from a direct plan to regular plan within the fund.
  • Tax considerations: HDFC Prudence Fund follows the same taxation rules as the equity-oriented fund. In case the investor redeems the units before completing one year from the date of initial investment, 15% tax is applicable as per short-term capital gains tax. On the other hand, if the units are held for more than a period of 1 year, the redeemed amount is tax-free.
  • Fund manager: The HDFC Prudence Fund is managed by Mr. Rakesh Vyas and Mr. Prashant Jain. Mr. Rakesh has an experience of 13 years in the capital market, out of which 8 years in equity research. He is currently a dedicated fund manager to manage overseas investments. Mr. Prashant is currently positioned as HDFC’s Executive Director and Chief Investment Officer. He has over 20 years of rich experience in Mutual Funds research and management.

HDFC Prudence Fund Performance

Historically, HDFC Prudence Fund has outperformed its benchmarks. However, in recent times the fund is underperforming mainly due to subdued recovery in the growth of corporate loan and rising NPA, as it has primarily bet on corporate banks.

Fund / benchmark1 year3 year5 year10 year
HDFC Prudence Fund2%9%12%14%
NIFTY 5013%9%13%9%
CISIL Hybrid fund 35-659%10%12%NA

Top Holdings of HDFC Prudence Fund

Following are the leading key equity and equity-related investments of HDFC Prudence Fund:

Investment sectorTop holdings
FinancialState Bank of India, ICICI Bank, Bank of Baroda, Canara Bank, etc.
TechnologyTata Consultancy Limited, Infosys, etc.
DiversifiedLarsen & Toubro, Apar Industries, etc.
EnergyReliance Industries, Power Grid Corp, NTPC, Cairn India, etc.
ChemicalsAarti Industries, Sharda Cropchem, etc.
AutomobileTata Motors, Maruti Suzuki India, etc.
MiscellaneousTata Steel, BEML, Aurobindo Pharma, Prism Cement, etc.

Following is the list of debt and debt-related investments made by HDFC Prudence Fund:

Debt instrument typeTop holdings
BondsState Bank of India 8.75%, Canara Bank 8.6%, Union Bank of India, IDBI Bank, Union Bank of India, Syndicate bank, etc.
Government of India securities8.13% GOI, 7.88% GOI 2030, 7.59% GOI 2026, 6.97% GOI 2026, etc.
Central Government Loan8.17% GOI 2044, 8.32% GOI 2032, 8.24% GOI 2033, 8.24% GOI 2027, 8.6% GOI 2028, 8.33% GOI 2036, etc
Bonds & Debentures8.75% Axis Bank 2017, 7.95% HDFC 2026, etc.
Debentures11.5% Bank of India 2050, 9.95% Syndicate Bank, 11.09% IDBI Bank 2050, etc.
Non-convertible Debentures11.5% Bank of India, etc.

Why Invest in HDFC Prudence Fund

The HDFC Prudence Fund is one of the most suitable investment options for investors who seek to receive periodic income from their mutual fund investment, while also receiving the capital appreciation over a long period of time. Moreover, one of the key objectives of HDFC Prudence Fund is to prevent capital loss in the long run, which often occurs in case of equity investment when the markets have a bull run. The fund invests in a range of equity and equity-related instruments and also maintains a balance through investment in a different type of debt and debt-related investment options.

Eligibility and Documents Required for HDFC Prudence Fund

The below-listed are some of the key eligibility criteria to invest in HDFC Prudence Fund.

  • Investors should be of minimum 18 years of age
  • He/she should be resident of India
  • KYC Compliant as per SEBI requirement

Documents required for HDFC Prudence Fund

Below is the list of the documents needed to apply for HDFC Prudent Fund

  • Application form: The applicant needs to fill the application form for a mutual fund account.
  • Proof of identity: Aadhaar/ PAN with photograph/passport/ Voter's ID / Identity card / Driving license with the applicant's photo issued by central or state government regulatory authorities.
  • Proof of address: Aadhaar / Passport / Driving licence / Voter’s ID / Ration card / Insurance copy / bank account statement, passbook/ Utility bills.
  • A cheque for SIP or lump sum amount

FAQs on HDFC Prudence Fund

How is HDFC Balanced Fund?

HDFC Balanced Fund aims to generate income and capital growth in the long run through investment in a dynamic combination of equity and debt investments. The fund has the mandate to reduce its equity exposure up to 30% based on the market conditions. Currently, the fund has a 43% equity investment, and the rest is in debt investment.

Should I invest in HDFC Prudence Fund?

The fund has a very high-risk component, and therefore, the volatility of the fund is on the higher side. The HDFC Prudence Fund is not suitable for conservative investors. Despite the recent downfall in its performance and risk component, the fund remains the top pick among many investors. Investors with moderate to high-risk capacity may consider HDFC Prudence Fund for long term financial objectives.

What is HDFC Prudence Fund dividend?

HDFC Prudence Fund Dividend option allows investors to receive dividend payouts on their mutual fund investments whenever the fund declares a dividend payout. In the case of dividend option, the investor can either opt for dividend payout or dividend reinvest. In case of reinvesting option, the investor is allotted additional mutual fund units equal to the value of the dividend earned.

What is HDFC Prudence Fund?

HDFC Prudence Fund is an aggressive hybrid fund. This scheme has been merged with HDFC Balanced Advantage Fund. The fund dynamically manages its portfolio between equity and debt investment to balance between the risk-return ratio of the investment.

What is the new name of HDFC Prudence Fund?

The new name of HDFC Prudence Fund is HDFC Balanced Advantage Fund.