PGIM India Balanced Advantage Fund NFO – Should you invest?

PGIM India Balanced Advantage Fund NFO - Review

PGIM India Balanced Advantage Fund NFO – Review


PGIM India Balanced Advantage Fund NFO would open for subscription on 15th January, 2021. 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 PGIM India Balanced Advantage Fund NFO? What are the risk factors an investor should consider before investing in such schemes?

Also Read: Top Balanced Advantage Funds to invest in 2021

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.

PGIM India Balanced Advantage Fund NFO Issue Details

This is an open-ended mutual fund equity scheme. Here are the NFO isuse details.

PGIM India Balanced Advantage Fund – NFO Issue Details
Scheme Opens 15-Jan-21
Scheme Closes 29-Jan-21
Scheme reopens for continous purchase/sale Within 5 days from closure
Minimum investment (Lumpsump) Rs 5,000
Minimum investment (SIP) Rs 1,000 for 6 months
NAV of the fund Rs 10 during NFO period
Entry Load Nil
Exit Load Nil if redeemed upto 10% in  90 days
0.5% if redeemed in 90 days beyond this
Risk Moderately High Risk
Max Total expense Ratio (TER) 2.25%
Benchmark CRISIL Hybrid 50+50 Moderate Index
Fund Manager Mr. Aniruddha Naha (Equity)
Mr. Kumaresh Ramakrishnan (Debt)
Mr. Anandha Padmanabhan (Foreign Securities)

Download PGIM India Balanced Advantage Fund NFO SID

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

To provide capital appreciation and income distribution to the investors by dynamically managing the asset allocation between equity and fixed income using equity derivatives strategies, arbitrage opportunities and pure equity investments. The scheme seeks to reduce the volatility by diversifying the assets across equity and fixed income.

However, there can be no assurance that the investment objective of the scheme will be achieved. The Scheme does not guarantee/ indicate any returns.

What is the allocation pattern in this mutual fund scheme?

This fund investment pattern is as follows:

Type of instruments Min % Max % Risk Profile
Equity & Equity Related Instruments 65% 100% Medium to High
Debt and Money Market Instruments 0% 35% Low to Medium

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 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) This fund would do asset allocation based on time tested DAAAF model which works on “buy high and sell low” concept.

3) This would dynamic asset allocation. 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.

4) This fund would invest in the model that beats NIFTY50 in bull phase as well as bear phase in terms of rolling returns (consistency in returns).

Some key risk factors you should consider before you invest in such 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 balanced advantage funds.

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) 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.

5) The scheme invests in foreign ETFs / securities where there is foreign exchange risk as well as geopolitical risks associate with it.

6) For complete risk factors, one can refer SID / KIM / Prospectus of the mutual fund scheme.

How is the Performance of Balanced Advantage Mutual Funds?

Currently there are existing balanced advantage mutual fund schemes. Here is the performance of these funds in the last 3 to 10 years tenure. The annualized returns ranging between 4.4% to 11.6%.

Fund Name 3 Year 5 Year 10 Year
Aditya Birla Sun Life Balanced Advantage Fund 8.0% 11.6% 9.6%
Edelweiss Balanced Advantage Fund 10.8% 11.2% 10.6%
Nippon India Balanced Advantage Fund 6.5% 11.1% 10.0%
ICICI Prudential Balanced Advantage Fund 8.6% 11.0% 12.1%
HDFC Balanced Advantage Fund 4.4% 10.7% 10.9%
L&T Balanced Advantage Fund 8.1% 8.0%
Principal Balanced Advantage Fund 4.8% 6.8% 8.7%

You may like: Best Balanced Mutual Funds to invest in 2021

Should you invest in the PGIM India Balanced Advantage Fund NFO?

This mutual fund scheme invests in equity and debt portion based on dynamic asset allocation. 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 9% to 12% annualized returns in the long term of 10 years. Moderate to high risk investors can invest in this NFO.

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Suresh KP

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