Quant Mutual Funds has launched Dynamic Asset Allocation Fund NFO that would open for subscription on 23rd March, 2023. It’s an open-ended fund that invests in equity and debt instruments while managing risk through active asset allocation. These funds would dynamically allocate assets which would invest high in equity when stock markets are undervalued and invest low when they are overvalued. Should you invest in Quant Dynamic Asset Allocation Fund? Let me review this Dynamic Asset Allocation Fund along with risk factors.
What is Dynamic Asset Allocation Fund?
Dynamic Asset Allocation Fund is also called as balanced advantage fund. These funds 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.
Quant Dynamic Asset Allocation Fund – NFO Issue Details
Here are the NFO issue details.
| Scheme Opens | 23-Mar-23 |
| Scheme Closes | 06-Apr-23 |
| Scheme reopens for continuous purchase/sale | Within 5 business days |
| Minimum Lumpsum | Rs 5000 |
| Minimum SIP | Rs 1,000 for 12 months |
| NAV of the fund | Rs 10 during NFO period |
| Entry Load | Nil |
| Exit Load | Nil |
| Risk | Very High |
| Benchmark | CRISIL Hybrid 50+50 Moderate Index |
| Fund Manager | Sandeep Tandon | Ankit Pande Sanjeev Sharma | Vasav Sahgal |
| Max TER | 2.00% |
What is the investment objective of Quant Dynamic Asset Allocation Fund?
The primary investment objective of the scheme is to provide capital appreciation by investing in equity and equity related instruments including derivatives and 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 |
|---|---|---|---|
| Equity & Equity related instruments | 0% | 100% | Very High |
| Debt and Money Market Instruments, including Units of Debt oriented mutual fund schemes | 0% | 100% | Very High |
| Foreign securities including ADRs / GDRs / Foreign equity and debt securities | 0% | 35% | Very High |
Performance of existing Dynamic Asset Allocation Funds
Let us look at the performance of existing Dynamic Asset Allocation Funds.
| Scheme Name | 3 Yrs | 5 Yrs | 10 Yrs |
|---|---|---|---|
| HDFC Balanced Advantage Fund | 29.3% | 12.9% | 15.5% |
| Edelweiss Balanced Advantage Fund | 18.5% | 12.0% | 12.2% |
| HDFC Dynamic PE Ratio FoF | 21.9% | 10.9% | 10.8% |
| ICICI Prudential Balanced Advantage Fund | 19.6% | 10.4% | 13.2% |
| Sundaram Balanced Advantage Fund | 15.9% | 10.2% | 12.0% |
| Union Balanced Advantage Fund | 18.2% | 10.1% | NA |
| Nippon India Balanced Advantage Fund | 17.0% | 10.0% | 12.6% |
| Aditya Birla Sun Life Balanced Advantage Fund | 18.5% | 9.7% | 12.0% |
| Franklin India Dynamic Asset Allocation Fund of Funds | 18.2% | 9.2% | 10.9% |
| Bandhan Balanced Advantage Fund | 15.0% | 8.4% | NA |
| DSP Dynamic Asset Allocation Fund | 12.1% | 8.2% | NA |
| HSBC Balanced Advantage Fund | 13.3% | 7.9% | 12.0% |
| Axis Balanced Advantage Fund | 12.3% | 7.9% | NA |
| Invesco India Dynamic Equity Fund | 15.3% | 7.3% | 12.2% |
| UTI Unit Linked Insurance Plan | 13.1% | 6.2% | 8.8% |
| Motilal Oswal Balance Advantage Fund | 9.7% | 5.5% | NA |
| Bank of India Balanced Advantage Fund | 12.0% | 5.1% | NA |
Why to invest in Quant Dynamic Asset Allocation Fund NFO?
Here are a few reasons to invest in this fund.
1) Dynamic Asset Allocation Fund invests in both equity and debt component. Hence it reduces the risk of investing in equity to some extent.
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.
3) Dynamic Asset Allocation Funds have generated 8% to 15% annualised returns in the long term even when stock markets are volatile.
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 a 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 default risk beyond interest rate risk and credit risk.
3) This mutual fund would invest in foreign securities where there is country risk and currency exchange rate risk.
4) For complete risk factors, investors can refer Scheme Information Document (SID) of the mutual fund scheme.
Should you invest in Quant Dynamic Asset Allocation Fund NFO?
Quant Dynamic Asset Allocation Fund invests in equity and debt instruments. It invests dynamically based stock market conditions. Dynamic Asset Allocation Funds work well when stock markets are overvalued or undervalued. This segment has generated stable returns in various market conditions.
On the other hand, since it invests in both equity and debt segment, one should not expect very high returns. Such funds can underperform during the bull run. Since it also invests in foreign securities, there are country risk and currency exchange risks too.
While Quant Dynamic Asset Allocation Fund One Pager document indicates that this fund is suitable for “risk averse investors”, however such funds fall under “very high” risk category and the same is indicated in Quant Dynamic Asset Allocation Fund NFO prospectus filed with SEBI. Hence, investors should not carry away with such one pager statements.
If you are a moderate to high-risk investor, you can invest in such mutual funds. If you do not want to invest with such new NFOs, you can invest in existing Dynamic Asset Allocation Funds for a medium to long term.
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Hi Suresh
Heard that Investment in mutual fund (where not more than 35% is invested in equity shares of Indian company) will now deemed to be short-term capital gains. This applies to investments made on or after April 1,2023.
It *means that debt & other non equity mutual funds (held for more than 3 years) Would not get indexation benefit nor will be eligible for 20% tax rate.*
Please could you confirm and elaborate with simple examples which MF will be affected and should we shift ?
New Article is being published in next 5 mts. Pls check that
How come only HDFC Balanced Advantage Fund generated a CAGR return of 29.3% over a 3-year period which is an outlier whereas all other funds, roughly, gave similar returns in a broad band. What was/is so special about HDFC Balanced Advantage Fund.
It is the discretion of the fund manager to think whether the market are over valued or under valued. HDFC Balanced Adv Fund has always been outperforming in this segment.