Sundaram Balanced Advantage Fund NFO – Should you invest?

Sundaram Balanced Advantage Fund NFO ReviewSundaram Balanced Advantage Fund NFO Review


Sundaram Balanced Advantage Fund NFO would open for subscription on 14th February, 2020. Many experts believe that balanced advantage fund score high compared to a hybrid fund. Some believe these would under perform compared to regular hybrid funds. What are Balanced Advantage Mutual Funds? Should you invest in Sundaram Balanced Advantage Fund NFO? What are the risk factors an investor should consider before investing in such schemes?

Also Read: Best Smallcap Mutual Funds to invest in 2020

What are Balance Advantage Mutual Funds?


Balanced advantage fund is the dynamic asset allocation fund. Such schemes dynamically manage equity and debt part based on the market conditions. The fund manager would have their own ratios and formulas to manage such investments dynamically. When stock markets are higher or overvalued, such funds would have lower exposure in equity and vice versa.

Sundaram Balanced Advantage Fund NFO Issue Details


This is an open-ended mutual fund equity scheme.

This is a dynamic asset allocation mutual fund scheme that invests in equity and debt portion.

This scheme would open for subscription on 14th February, 2020.

This scheme would close for subscription on 28th February, 2020.

Since this is an open ended scheme, it would again open for subscription after 8 business days from the date of allotment of Mf units after the NFO period.

This scheme is available in both regular and direct plans.

This plan offers both growth option and dividend option.

This scheme is available for lump sum and SIP investment.

Minimum investment is Rs 5,000 and in multiples of Rs 1 there-off for lump sum investments.

Minimum investment is Rs 100 per month for monthly SIP and for a tenure of 6 months.

The NAV of the NFO is Rs 10 per unit now during initial subscription.

There is no entry load to invest in this mutual fund scheme.

There is no exit load if you exit after 1 year. However, if you wish to exit before 1 year, here is the exit load details.

a) If you wish to exit 10% of the units before 1 year – No exit load

b) If you wish exit more than 10% of the Mf units before 1 year – there is a 1% exit load.

This scheme is classified as moderately high risk mutual fund scheme.

Scheme total expense ratio (TER) is estimated at a maximum of 2.25% of the total assets on any day.

Sundaram Balanced Advantage Fund NFO details can be downloaded here.

Who can invest in this mutual fund scheme?


Any of the following can invest in this scheme.

1) Resident Individuals

2) Resident Indian Nationals, including partnership forms, companies, Banks, HUFs, Sole Proprietorship etc.,

3) NRI’s

4) Foreign Portfolio Investors

Who is the Fund Manager of Sundaram Balanced Advantage Fund NFO NFO?


Mr. S Bharath & Mr. S Krishnakumar are the fund managers of this scheme.

Mr. Dwijendra Srivastava would be fund manager for the fixed Income portion of this scheme.

What is the benchmark for this scheme?


The benchmark for this scheme is CRISIL Hybrid 50%+50% Moderate Index.

What is the investment objective and strategy of this Sundaram Balanced Advantage Fund NFO?


The investment objective of the Scheme is to provide accrual income and capital appreciation by investing in a mix of equity, debt, REITs/InvITs and equity derivatives that are managed dynamically.

What is the allocation pattern in this mutual fund scheme?


This fund investment pattern is as follows:

1) It invests 0% to 100% in equity and equity related Instruments. The risk profile in this segment is high.

2) It invests 0% to 100% in the fixed income, money market Instruments and Government Securities cash and cash equivalents. The risk profile in this segment is low to high.

3) It would invest 0% to 10% in units issued by REITs and InvITs. The risk profile in this segment is medium to high.

4) The Scheme may use derivatives for trading, investment, hedging and portfolio balancing. Exposure to derivatives will be limited to 50% of the net asset value of the Scheme at the time of transaction.

5) The scheme may invest in securities, debt up to 35% of the fixed income allocation (including accrued interest)

6) The scheme shall engage in securities lending subject a maximum of 20% and 5% for a single counter party.

7) The scheme may invest in repo in corporate bond up to 10% of the net assets of the fixed income allocation, in accordance with SEBI  regulations. The Scheme will not invest in foreign securities and credit default swaps.

Here is how the fund manager would take decisions.

How investment decisions taken in sundaram balanced advantage fund

Can NRI invest in this MF scheme?


Yes, they can invest in this scheme. They can invest on repatriation or non repatriation basis.

Why should you invest in such Dynamic Asset Hybrid Funds / Balanced Advantage Funds?


Here are a few reasons to invest in such schemes.

1) Balanced advantage scheme invests in equity and debt portion, hence it reduces risk to some extent since it does not invest 100% in equity.

2) Balance advantage fund works on the concept of dynamic asset allocation funds. If the stock market is overvalued, it would reduce equity exposure and if the stock market is undervalued, such scheme would increase equity exposure. This concept helps to invest  more when the stock market is undervalued.

Some key risk factors you should consider before you invest in such small cap funds


One should consider some of these risk factors / negative factors before investing.

1) This scheme invests in debt portion. These days, investment in debt instruments has also become high risk due to downgrade of corporate credit ratings and default on payments by corporates.

2) Investors should not assume any guaranteed returns from such small cap mutual fund schemes.

3) Since it is a new mutual fund scheme, there is no past performance, hence we would not know, how the fund would perform in the future.

4) It invests up to 10% in REIts and InvITs which are high risk.

5) The Scheme proposes to invest in equity and equity related instruments by identifying and exploiting price discrepancies in cash and derivative segments of the market. These  investments by nature are volatile as the prices of the underlying securities are affected by various factors such as liquidity, time to settlement date, news flow, spreads between cash and derivatives market at different points of time, trading volumes, etc.

6) The Scheme is also expected to have a high portfolio churn, especially in a volatile market.

How is the Performance of Balanced Advantage Mutual Funds?


Currently there are existing balanced advantage mutual fund schemes. Let us see how some of the balanced advantage funds performing in the last 5-10 years.

1) ICICI Prudential Balanced Advantage Fund: This fund gave 12.5% annualized returns in the last 10 years, 9% annualized returns in the last 5 years, 9% annualized returns in the last 3 years and 12.5% returns in the last 1 year.

2) Aditya Birla Sun Life Balanced Advantage Fund: This fund gave 10% annualized returns in the last 10 years, 8% annualized returns in the last 5 years, 7% annualised returns in the last 3 years and 10% returns in the last 1 years.

3) HDFC Balanced Advantage Fund: This fund gave 12% annualized returns in the last 10 years, 8% annualized returns in the last 5 years, 7% annualized returns in the last 3 years and 8% returns in the last 1 years.

You may like: Best Largecap Funds to invest in India

Should you invest in the Sundaram Balanced Advantage Fund NFO?


This mutual fund scheme invests in equity and debt portion. It invests dynamically based stock market conditions. Balanced advantage fund concept is good (invest low in equity when the stock market is highly valued and invest high in equity when the stock market is in low valuations). However, this would depend on how well fund manager is able to value the stock market. If you observe, the mutual funds under this segment has given 10% to 12% annualized returns in the long term of 10 years. This segment gave 8% to 12% in the last 1 year.  Means, one can expect returns which are higher compared to bank FD schemes. If you are okay with such returns, you can invest in such mutual fund schemes. Alternatively, if you can take a little higher risk, you can invest in simple hybrid mutual fund schemes that can provide higher returns compared to these dynamic asset allocation hybrid funds.

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Suresh KP

Sundaram Balanced Advantage Fund NFO Review

2 comments

  • Deepashri

    Hi Suresh,
    What is ideal combination of mutual funds for investment for the purpose of wealth creation for mid term.
    E.g. Total 6 funds
    3 mid cap, 2 large cap, 1 small cap

    • Heelo Deepashri, It would depend on your risk appetite and tenure you want to invest. Ideally the tenure should be 8-10 years. If you are high risk investor, add more in midcap/small cap (70%). If you are moderate to high risk, you can make this %age as 50%. If you are moderate investor, you can reduce this to just 20% to 30% and balance invest in largecap/hybrid/diversified funds

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