Of about 16 equity oriented categories, only one of them, the Balanced Advantage category, does not have a defined mandate for allocation between equity and debt.
It’s raining NFOs! TATA mutual fund has launched Tata Balanced Advantage Fund, an open-ended dynamic asset allocation fund, where the investment in equity and debt is to be managed dynamically. The scheme’s new fund offer (NFO) period is from January 09, 2019 and ends on January 23, 2019.
The investment objective of the Scheme is to provide capital appreciation and income distribution to the investors by using equity derivatives strategies, arbitrage opportunities and pure equity investments.
How different is the Balanced Advantage category
There are ten categories of equity schemes and about six categories of hybrid schemes where some exposure to equities is there. Of about 16 equity oriented categories, only one of them, the Balanced Advantage category, does not have a defined mandate for allocation between equity and debt. This means the fund manager of the Balanced Advantage scheme is allowed to invest between 0 and 100 percent of the total portfolio in equites.
In the Balanced Advantage category, the schemes will change the asset allocation as per strategies adopted by the fund. Investors, therefore, need not have to worry about timing the market and getting the allocation right. With most such funds, the asset allocation model relies on valuation, trend and volatility parameters to decide allocation to equity.
Equity exposure of Tata Balanced Advantage Fund
Tata Balanced Advantage Fund in its website has clearly mentioned that “Typically, more than 65% of the fund will have equity allocation with/without hedged equity/arbitrage exposure to ensure tax efficiency while the net long (unhedged) equity exposure may vary depending upon asset allocation criteria/asset allocation model.”
So, what can the investor expect from the asset allocation pattern of Tata Balanced Advantage Fund? The fund house says, “Active allocation to equity and equity related instruments as per proprietary asset allocation model, the fund will maintain minimum 65%-100% allocation to equity including hedged equity/arbitrage exposure and debt allocation between 0%-35%.”
The fund manager for the equity is Rahul Singh and Sonam Udasi, while Sailesh Jain will manage the hedged equity or arbitrage part and the debt market will be managed by Akhil Mittal. The fund’s benchmark will be CRISIL Hybrid 35+65 – Aggressive Index
What to do
Volatility and uncertainty are inherent in equity investments.Hence, investing in the equity asset class through mutual funds is often recommended as the right approach. The fund manager is supposed to take care of the vagaries of the stock market which a retail investor may not be equipped with.
Equity MF schemes fall in various categories and therefore picking the right MF scheme within each MF category will go a long way in determining the final returns for you.
Unlike most other equity funds which have a fixed mandate and are clear about the exposure in stocks across the market cap, any such mandate is non-existent in the Balanced Advantage category.
For an investor, picking one or more scheme in this category needs careful evaluation. While many schemes in the category may not be primarily investing in equities, the Tata Balanced Advantage Fund is clear on its equity exposure. New investors may wait for the scheme to perform, see its sector allocation and market cap exposure levels and then decide to include it in one’s MF portfolio.