NJ Balanced Advantage Fund – Review [NFO]
NJ Mutual Funds has launched its first mutual fund scheme in India. NJ Balanced Advantage Fund NFO would open for subscription on 8th October 2021. It’s an open-ended fund that invest based on dynamic asset allocation between equity and specific debt securities. Should you invest in NJ Balanced Advantage Fund? Let me review this Balanced Advantage fund along with risk factors.
What is 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.
NJ Balanced Advantage Fund – NFO Issue Details
NFO Period: This fund would open for subscription on 8th October 2021 (Friday) and closes on 22nd October 2021 (Friday). Since it is an open-ended scheme, it reopens for further subscription after 5 working days from closure.
Where does the scheme invest: It is an open-ended dynamic asset allocation mutual fund scheme.
Plans available: Like other funds, it offers both NJ Balanced Advantage Fund – Regular Plan and NJ Balanced Advantage Fund – Direct Plan.
Further like any other fund, it provides Growth, Payout of Income Distribution cum capital withdrawal (IDCW) & Reinvestment of Income Distribution cum capital withdrawal (RIDCW)
Minimum Application Amount: Rs 500 and in multiples of Rs 1 there-of.
Load Structure: Entry load is nil and exit load would be 1% if redeemed within 1 month.
Fund Manager: Mr. Rishi Sharma
Benchmark Index: NIFTY 50 Hybrid Composite Debt 50:50 Index
Total Expense Ratio: 2.25%
Taxation of returns: Returns from the balanced advantage fund would be taxed like equity-oriented funds. LTCG > Rs 1 Lakh per financial year are taxed at 10% without indexation benefit. Any returns less than 1 year would be classified as STCG, and necessary tax needs to be paid.
What is the investment objective of NJ Balanced Advantage Fund NFO?
The investment objective of the Scheme is to generate capital appreciation by dynamically allocating its assets between equity and specified debt securities.
However, there can be no assurance or guarantee that the investment objective of the scheme would be achieved.
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 including Derivatives||0%||100%||Medium to High|
|Specified Debt Securities||0%||100%||Low to Medium|
Why to invest in NJ Balanced Advantage Fund NFO?
Here are a few reasons to invest in this fund.
1) Balanced advantage fund invests in both equity and debt component. Hence it reduces the risk of investing in equity to some extent since it does not invest 100% in equity.
2) Balance advantage fund works on the concept of dynamic asset allocation. If the stock market is overvalued, it would reduce equity exposure. If the stock market is undervalued, such scheme would increase equity exposure. This concept helps to invest more in equity when the stock market is undervalued.
Major risk factors you should consider before investing in such funds
One should consider some of these risk factors / negative factors before investing.
1) This scheme invests in debt portion. Investment in debt instruments has become high risk due to downgrade of corporate credit ratings and delay in repayment of debt instruments by corporates where mutual fund schemes have invested. Beyond this there is interest rate risk, credit risk and default risk in debt instruments.
2) The mutual fund would allocate its assets and selects stocks using a rule based active approach based on proprietary protocols. Such protocols are derived based on analysis of various market, macroeconomic and fundamental factors. Based on the emerging information and analysis, these protocols / rules may change from time to time. There is no guarantee that these rules will generate higher returns compared to the benchmark.
3) It invests up to 50% in derivatives which are high risk.
4) For complete risk factors, investors can refer Scheme Information Document (SID) of the mutual fund scheme.
Performance of existing Balanced Advantage Funds
Let us look at the performance of existing balanced advantage funds (annualised returns).
|Scheme Name||3 Yrs||5 Yrs|
|Edelweiss Balanced Advantage Fund||16.5%||14.6%|
|HDFC Balanced Advantage Fund||13.0%||12.8%|
|Nippon India Balanced Advantage Fund||13.0%||12.7%|
|ABSL Balanced Advantage Fund||13.8%||12.0%|
|ICICI Pru Balanced Advantage Fund||12.9%||11.8%|
|IDFC Balanced Advantage Fund||12.8%||11.6%|
|Invesco India Dynamic Equity Fund||10.1%||11.2%|
|DSP Dynamic Asset Allocation Fund||13.0%||10.3%|
|Franklin India Dynamic Asset Allocation FoF||10.0%||10.1%|
|L&T Balanced Advantage Fund||10.8%||10.0%|
|UTI Unit Linked Insurance Plan||8.7%||9.3%|
|Principal Balanced Advantage Fund||8.3%||8.3%|
|BOI AXA Equity Debt Rebalancer Fund||3.8%||4.8%|
Also Read: Top Flexicap Mutual Funds to invest now
Should you invest in NJ Balanced Advantage Fund?
NJ Mutual Fund Balanced Advantage Fund 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. Mutual funds under this segment have generated 5% to 14% annualized returns in the last 5 years. Consistent balanced advantage funds generated 10% to 12% annualized returns. Moderate to high-risk investors can invest in such funds.
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