𝗟𝗲𝘁'𝘀 𝗹𝗼𝗼𝗸 𝗮𝘁 𝗯𝗮𝗹𝗮𝗻𝗰𝗲𝗱 𝗮𝗱𝘃𝗮𝗻𝘁𝗮𝗴𝗲 / 𝗱𝘆𝗻𝗮𝗺𝗶𝗰 𝗮𝘀𝘀𝗲𝘁 𝗮𝗹𝗹𝗼𝗰𝗮𝘁𝗶𝗼𝗻 𝗳𝘂𝗻𝗱𝘀 𝘁𝗵𝗶𝘀 𝗦𝘂𝗻𝗱𝗮𝘆!
1.
#Balancedadvantage /
#dynamicassetallocation funds are a type of hybrid schemes described by SEBI’s ‘Categorisation & Rationalisation of
#MutualFund Schemes’ as ‘open ended dynamic asset allocation funds’ with
#investment in equity / debt that is managed dynamically.
2. These funds blend equity, derivatives (to hedge their equity positions thereby limiting downside, depending on the fund manager’s view of equity markets) & debt to dynamically manage their asset allocation.
3. Take a look at Graph 1 below. It shows what the average net equity position of all the funds in this category looked like since January 2022. Higher net equity indicates a more aggressive stance whereas a lower net equity position (due to greater hedging of equity positions via derivatives) indicates a more cautious approach. The average net equity position also provides clues as to how the fund managers are viewing the market.
4. True to their description, these funds vary widely in their equity and derivatives mix. Net equity positions for July 2023 vary from 37.5% to 80.33%. Graph 2 below shows the gross and net equity (after hedging) positions of some of the major funds in this category.
5. Varying allocations notwithstanding, these funds still maintain a 65% equity exposure making the taxation aspect clear. However, comparing returns will need to factor in the fund manager’s approach to allocation.
#mutualfundsindia #investingbasics