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Dynamic Asset Allocation Fund – should you invest?

What is Dynamic Asset Allocation Fund?

Dynamic Asset Allocation Fund is scheme which aims to maximize investors wealth by providing an opportunity to invest in a portfolio of a mix of equity and fixed-income instruments. The proportion between debt and equity will be managed by the fund house in an efficient manner, they tend to go long in equity when the markets are expected to go up and long on debt when stocks are not doing so good.

So a question that might come to your mind is that are these funds appropriate for you? Suppose you are a person who is not able to manage right mix of assets then this type of fund is apt for you; this is because you can achieve a proper balance in your portfolio as the fund manager takes care of balancing the portfolio between equity and debt.

This re-balancing of mutual funds assets reduces the volatility of returns.

About ICICI Prudential Balanced Advantage Fund:

ICICI Prudential Balanced Advantage Fund is a dynamic asset allocation fund. It strives for growth by investing in equity markets, while providing relative safety through investments in debt instruments.

The fund aims of generating reasonable returns even in volatile markets by following the mantra of Buy low and sell high.

ICICI Prudential Balanced Advantage Fund (BAF). uses the Price to Book (P/B) model to buy when the valuations are low and sell when the valuations are high this helps remove the psychological barrier of greed and fear for its investors. They use P/B ratio against price to earnings (P/E) because they feel P/B is a more logical valuation technique as it increases gradually compared to P/E.

The fund allocates higher in equity when the stock market valuations are low and low when the market valuation is high.

  • The stocks selected by the fund are a blend of large caps and mid cap stocks.
  • The net equity level range 30-80% based on in-house P/BV model.

The fund is currently managing assets of over Rs 15,000 crore. The fund has outpaced its benchmark in seven of the past eight years since launch.

baf-sip

SIP returns:

  • Rs 1000/- invested pm from October 1st 2013
  • Total investment till now Rs 37,000 worth now Rs 46,011.30

From the below table it is evident that the fund had a limited downside as compared to upside.

Best & Worst Performance Best (Period) Worst (Period)
Month 9.69   (May 07, 2014 – Jun 06, 2014) -6.43   (Jan 13, 2016 – Feb 12, 2016)
Quarter 15.66   (Sep 03, 2013 – Dec 03, 2013) -9.78   (Nov 26, 2015 – Feb 25, 2016)
Year 46.44   (Sep 03, 2013 – Sep 03, 2014) -5.80   (Feb 25, 2015 – Feb 25, 2016)

 

The fund had a beta of 0.75 and an alpha of 7.51. Alpha signifies by how much percentage has the fund outsmart the benchmark in delivering the returns.

The fund is currently invested 60.5% in equity, 33.47% in debt and rest in cash.

To know more about the fund visit – here.

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SIP returns chart and Best and worst performance source – ValueResearchOnline

Mutual Fund investments are subject to market risks, read all scheme related documents carefully

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