LIC MF Launches Balanced Advantage Fund NFO – Review
LIC Mutual Fund has launched Balanced Advantage Fund NFO that opened for subscription on 20th October 2021. It’s an open-ended fund that invest based on dynamic asset allocation between equity and debt instruments. When stock markets are volatile and market corrections are expected in near term, investing in balanced advantage fund is the best bet. Should you invest in LIC MF Balanced Advantage Fund NFO? What are the risk factors in such funds? Let me review this Balanced Advantage fund along with risk factors.
Also Read: Best Balanced Advantage Mutual Funds to invest
What is Balance Advantage Mutual Fund?
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.
LIC MF Balanced Advantage Fund – NFO Issue Details
Here are the NFO issue details.
| Scheme Opens | 20-Oct-21 |
| Scheme Closes | 03-Nov-21 |
| Scheme reopens for continuous purchase/sale | 15-Nov-21 |
| Minimum Lumpsum | Rs 5,000 |
| Minimum SIP | Rs 500 for 6 months |
| NAV of the fund | Rs 10 during NFO period |
| Entry Load | Nil |
| Exit Load | 0% to 12% with 12 months – Nil load > 12% within 12 months – 1% exit load > 12 months – Nil load |
| Risk | Very High Risk |
| Benchmark | LIC MF Hybrid Composite 50 : 50 Index |
| Fund Manager | Mr. Yogesh Patil (Equity) and Mr. Rahul Singh (Debt) |
| Max TER | 1.00% |
LIC MF Balanced Advantage Fund SID
What is the investment objective of LIC MF Balanced Advantage Fund NFO?
The investment objective of the scheme is to provide capital appreciation/ income to the investors from a dynamic mix of equity, debt and money market instruments. The Scheme seeks to reduce the volatility by diversifying the assets across equity, debt and money market instruments.
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 |
|---|---|---|---|
| Equities and equity related instruments | 0% | 100% | High |
| Debt and Money Market Instruments | 0% | 100% | Low to Medium |
| Units issued by REITs and InvITs | 0% | 10% | Medium to High |
Why to invest in LIC MF 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 instruments between 0% to 100%. 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.
2 Investments in debt instruments have interest rate risk and credit risk beyond default risk.
3) 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.
4) It invests in derivatives which are high risk.
5) This fund also invests in REITs and InvITs which are high risk.
6) 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.
| Scheme Name | 3 Yrs | 5 Yrs | 10 Yrs |
|---|---|---|---|
| Aditya Birla Sun Life Balanced Advantage Fund | 14.3% | 10.7% | 11.8% |
| Edelweiss Balanced Advantage Fund | 18.5% | 13.8% | 12.5% |
| Franklin India Dynamic Asset Allocation Fund of Funds | 11.5% | 9.9% | 10.7% |
| HDFC Balanced Advantage Fund | 17.4% | 12.6% | 14.3% |
| ICICI Prudential Asset Allocator (FOF) Fund | 14.6% | 12.9% | 12.3% |
| ICICI Prudential Balanced Advantage Fund | 14.6% | 11.2% | 13.7% |
| Invesco India Dynamic Equity Fund | 11.7% | 10.0% | 12.5% |
| L&T Balanced Advantage Fund | 11.0% | 8.8% | 12.2% |
| Nippon India Balanced Advantage Fund | 13.8% | 11.1% | 13.4% |
| Principal Balanced Advantage Fund | 8.2% | 7.2% | 10.2% |
| UTI Unit Linked Insurance Plan | 11.1% | 9.1% | 10.2% |
Also Read: Best Mutual Funds for 5 years Tenure
Should you invest in LIC MF Balanced Advantage Fund?
LIC MF 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. Some of the mutual funds under this segment has been under performers and generated 7% to 8% returns only. If you are moderate to high risk investor and would like to test new balanced mutual fund schemes, you can invest in this new fund offer. Otherwise, you can invest in existing top performing balanced advantage funds which have already proven their performance in medium to long term.
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Dear Suresh
Pls also cover on Bajaj Alliance Flexi Income Goal Plan.
Is this sort of guaranteed returns plan?
What are the cons ?
Can you pls post this on suggest a topic option so that i can review and post in coming weeks?
Sure sir will do.
I heard this plan is guaranteed tax free return as it invest in bonds mainly unlike ulip which is mkt linked. Hence it will be very interesting to read your expert review on the same, as all your blog readers value your opinion and analysis a lot. I must say you have gained massive trust which is a very difficult thing to earn. Respect
Sure. Request you to post this, and I would review in coming days.