In a balanced advantage fund (BAF), will the fund manager change the fund portfolio depending on the market condition? Will there be any advantage of investing in such a fund now?
A few funds in the balanced advantage fund category manage their allocation in a tight range, while for some the allocation is managed dynamically with the equity allocation moving up or down sharply in response to the manager’s conviction on equity markets. The median net equity allocation for funds in this category has ranged from 39% to 72% over the past three years (as of June 2022). Such sharp changes subject investors to the risk of the manager’s skills in reading the market accurately and can impact his actual asset allocation vis-à-vis his recommended allocation. Asset-allocation calls are taken by the fund manager at his/her sole discretion, relieving investors of the need to assess markets and decide their asset allocation on their own. However, the allocations maintained by the fund manager in such funds may not be ideal for every investor, based on their risk appetite and time horizon. To gain better control over asset allocation in line with the recommended asset allocation, you can consider investing in pure-play equity and fixed-income funds, which would account for your risk appetite and time horizon.
How can I switch from a regular plan to a direct plan?
Investors can login to their accounts either on the mutual fund website or the website of an intermediary, and select the ‘Switch’ option to move out from the existing ‘Regular plan’ of a fund and into the desired ‘Direct plan’ option of the same fund. You can also take the offline route by filling up the switch form and depositing it either at an AMC branch, or branches of registrar & transfer agents (R&Ts). You may be charged an exit load in case the units are switched within the exit load period. The switch would also be seen as a redemption from the out-going plan and any gains realised would be subject to either short-term or long-term gains tax, as applicable depending on the holding period and the asset-class orientation of the funds concerned.
The writer is director, Investment Advisory, Morningstar Investment Adviser (India). Send your queries to firstname.lastname@example.org