DSP Investment Managers has announced the launch of DSP Nifty 50 Equal Weight ETF, India’s First Exchange Traded Fund based on the Nifty 50 Equal Weight Index. The New Fund Offer (NFO) opens for subscription on October 18th and closes on October 29th, after which it will be purchased and sold on the exchanges.
What is equal weight index
In an equal weight index, each stock in it gets equal weight. Thus, if the strategy is applied to Nifty 50, the equal weighted index will own the same 50 companies as Nifty 50 and will have 2% weight to each company unlike the current market cap weight design where some stocks get large weights like 9-10% and many stocks in the lower tail get only 0.3%. This gives all companies in the index an equal chance to contribute to returns rather than being overly dependent on the top 10.
Why DSP Equal Nifty 50 ETF
The DSP Equal Nifty 50 ETF, owing to its methodology, aims to provide better sector and stock diversification compared to Nifty 50 Index.
The top 10 stocks accounted for nearly 60% of the weightage of the Nifty 50 index as on September 30, 2021 compared to only around 20% of the Nifty 50 Equal Weighted Index.
The Nifty 50 Equal Weighted Index has outperformed the Nifty 50 index by 2.02% CAGR since inception and has outperformed the Nifty 50 Index in 12 out of 21 calendar years.
Investment philosophy
The DSP Equal Nifty 50 ETF follows two core investment principles – investing in sector leaders that can ride through market cycles along with better diversification across companies and sectors with equal stock weights that offer lower stock specific risks and lower sector concentration compared to the Nifty.
Apart from a diversified portfolio at a relatively lower cost, the Nifty 50 Equal Weight ETF offers the advantage of simplicity of buying and real time trading.
The Equal Weight Index gets rebalanced on a quarterly basis. Owing to this quarterly rebalancing method, an equal weight portfolio has a built-in profit booking mechanism, in effect buying the underperformers at “low†and selling the outperformers at “highâ€.
Why ETF
An ETF offers 4 advantages.
1) Investing in ETFs is as simple as buying-selling any other stock on the exchange.
2) ETFs allow you to take benefit of intraday movements in the market, which is not possible with open-ended Funds.
3) The cost of investing in ETFs is generally lower than an active fund invested in the same market of assets.
4) Holdings published daily in ETFs, so you always know exactly what is owned.
Fund-house speak
“When we studied this concept of equal weight indices globally, we noticed that over long periods equal weighting tends to earn better returns than market cap weighted indices. This happens as all the companies get chance to participate rather than just the top few. Such a strategy has its phase of underperformance when economy’s profits are polarised to select companies like in recent five years. However, over the long term as good companies across sectors grow and create value, an equal weight strategy gives meaningful weight to each company in the index. Equal weighting also ensures that the most over owned sector at any time is de risked,†says Kalpen Parekh, MD & CEO, DSP Investment Managers.
“Equal weighting takes advantage of certain market inefficiencies caused by behaviour biases, since the strategy is not affected by the over-optimism in certain stocks and over-pessimism in others. Such inefficiencies have helped equal weight index strategy to outshine traditional market cap based index strategies,†says Anil Ghelani, CFA, Head – Passive Investments & Products, DSP Investment Managers.
Category: Mutual Fund
NFO review: LIC MF Balanced Advantage Fund
LIC Mutual Fund will launch the new fund offer of LIC MF Balanced Advantage Fund. The NFO period opens on October 20 and will close on November 3, 2021. This is among the last fund-houses in the current crop to launch a balanced advantage fund product, called BAF in MF industry parlance.
Scheme objective
The investment objective of the scheme is to provide capital appreciation/ income to the investor 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 is no assurance or guarantee that the investment objective of the Scheme will be realized.
Why invest
LIC MF Balanced Advantage Fund may reduce the impact of losses in adverse market conditions on predefined parameters. Allocation through Fundamental Based Mathematical Model (FMM) will give an edge over plain vanilla equity funds.
The fund endeavours to keep its gross equity exposure greater than or equal to 65% to enable investors to avail equity taxation benefit. Plus, the fund aims to generate near equity returns with lower volatility.
Deciding asset allocation
The fund will input various parameters such as interest rate, future earnings yield and price to earnings ratio in its model. The model output is the net equity exposure, basis on which the fund will calculate the mix between net equity exposure, arbitrage and debt.
Stock / security selection will be based on internal research and investment framework. The portfolio is constructed keeping in mind the investment objective of the fund.
Rebalancing the asset allocation based on the model output. The fund manager looks into various aspects of business environments including valuations and other parameters while rebalancing the portfolio with an objective of optimizing the returns.
Who should invest
LIC MF BAF is ideal for iInvestors looking for long term wealth creation, looking for diversification of investments, looking for products with lower volatility than the pure equity product and who are uncomfortable buying stocks at extremely high valuations.
While many think they can do asset allocation themselves, practical experience shows that would be very tough. It is important to stick to a model based asset allocation, dynamic approach towards equities, and enjoy the experience of years of managing debt & equity.
NFO details
Fund manager – Yogesh Patil and Rahul Singh
Benchmark – LIC MF Hybrid Composite 50 – 50 index
Special facility – SIP and switch
Minimum application amount – Rs 5,000
PPFAS CIO Rajeev Thakkar shares 4 market wisdoms
PPFAS CIO Rajeev Thakkar has come up with four market wisdoms for investors as markets rise almost every week. These wisdoms will help re-orient investors’ mindset at a time when markets are positioned precariously.
#1 Avoid price action
“Our investments are based on our fundamental assessment of the business and its prospects and not on price action. Hence, kindly do not expect only those stocks where the price is going up to be in our portfolios,” Thakkar said.
#2 Patience is key
Having invested in a company, one has to be patient with the investment. One cannot expect overnight returns and sometimes it takes a long time for the returns to come. Sometimes patience works in favour, other times it does not.
“I am giving one example of each. Persistent (Pun not intended) Systems: We bought the stock in November 2014 and added more along the way. Till March / April of 2020, the stock did not have much to contribute to the portfolio. However the returns post that period more than made up for the lost years.
#3 Probabilities and not certainties
Equity investing is about taking due care in selecting the companies and management and deciding on the price to pay for the shares. However there are no certainties. At a portfolio level one should aim for a decent risk adjusted return. “There will be some businesses (companies) which do not do as was expected of them and may lose money either in terms of actual loss or in terms of opportunity cost. These cannot be completely avoided. One can only try to minimise these,” Thakkar said.
The current environment is such that valuations are clearly elevated in a lot of companies and sectors. Also trailing returns are looking exceedingly good. To use a cricket analogy again, the run rate so far (trailing returns) is exceedingly good. “To win the match (reach financial goals) ones and twos and an occasional boundary will do the job and sixes are not really required. Also the best bowlers of the opposite side have started to bowl (high valuations). At such a time, it is important to conserve the wickets (capital and gains so far) rather than to hit out at every ball and try to get a six,” Thakkar said.
#4 Underperformance is guaranteed for sometime
PPFAS MF says its investments in companies ignores whether they form part of the index or not and if it is a part of the index, the weightage of the company in the index. Portfolio looks very different from the index and as a consequence, for better or worse, the performance will be different from the index.
“No strategy (even if it has a long successful track record) beats the benchmark index all of the time. There are times and sometimes long stretches of time where the performance of an actively managed portfolio lags that of the benchmark. In our case this is usually, but not always, seen in bull markets where the market keeps scoring via sixes and we take singles,” says Thakkar.
NFO review: Aditya Birla Sun Life Nifty Healthcare ETF
Aditya Birla Sun Life AMC has announced the launch of Aditya Birla Sun Life Nifty Healthcare ETF. It is an open-ended exchange-traded fund (ETF) that will track the Nifty Healthcare TRI (Total Return Index). The New Fund Offer (NFO) opened for subscription on October 8 and closes on October 20.
What’s special
Aditya Birla Sun Life Nifty Healthcare ETF offers exposure to top companies in the pharma and healthcare sector. It provides diversification across sub-sectors, through investment in pre-dominantly large-cap stocks. Importantly, it is an ETF which assures lower costs for investors compared to actively managed funds.
Investment objective
The objective of this scheme is to ride the opportunities in the healthcare sector and generate long-term capital growth for investors. The Aditya Birla Sun Life Healthcare ETF through the Nifty Healthcare Index, provides investors access to a well-diversified index and a sector that has demonstrated strong growth capabilities and is a critical part of the economy.
About the underlying index
The Nifty Healthcare Index comprises a maximum of 20 tradable, exchange-listed companies and has a well-diversified sub sector allocation. This includes companies from fields such as pharma, hospitals, medical devices and supplies, laboratories and diagnostics as well as medical insurance. The sub-sectors also include companies engaged in formulations, APIs, CRAMs and other healthcare services.
The index is constituted on a free-float market capitalization method and is reconstituted semi-annually. This index has significantly outperformed the broader market indices in recent years.
Fund-house speak
A. Balasubramanian, MD & CEO, Aditya Birla Sun Life AMC Limited said, “Healthcare has become one of India’s core sectors, in terms of revenue, exports and employment generation. This growth is reflected in the market performance of healthcare companies. The Nifty Healthcare Index has grown more than 9x from its base date vis-à -vis Nifty, which has grown 8x in the same period. It has generated double-digit returns in both short-term (3 years) and long-term (10 years).â€
He adds, “As it is a passive fund, it minimizes the investing cost and need for stock selection, at the same time offering the benefit of share-like trading. The Healthcare ETF will be an easy way for investors to be a part of this sector’s growth journey.â€
Healthcare sector outlook
It is increasingly being realised that the healthcare sector is the foundation of a healthy economy. As per NITI Aayog Report 2021, the total opportunity for growth in the pharma sector is from ₹4.84 lakh crore in 2021 to ₹12.88 lakh crore by 2030, driven by rising income, better health awareness, and increasing access to insurance, among others. Moreover, the Government of India aims to increase healthcare spending to 2.5% of the Gross Domestic Product (GDP) by 2025 and make India a global healthcare hub.
All this means that the healthcare sector is well-poised for a strong growth trajectory. And ABSL AMC’s Healthcare ETF provides investors an option to benefit from it in the long term. The minimum application amount for this fund is Rs 500 and in multiples of Rs 100 thereafter, during the NFO period.
Existing healthcare funds
The pharma/healthcare sectoral mutual fund category has 13 existing products and Aditya Birla Sun Life Nifty Healthcare ETF is the 14th one.
The biggest and most prominent ones are Nippon India Pharma, ICICI Pru Pharma Healthcare & Diagnostics, SBI Healthcare Opp, Mirae Asset Healthcare and DSP Healthcare.
The last 1 year returns of the category have been between 25-35 per cent. The 3 year trailing gains have been between 24-32 per cent CAGR. The 5 year gains have been in 10-16 per cent CAGR.
In the passive segment of the market, Aditya Birla Sun Life Nifty Healthcare ETF will compete with Nippon India Nifty Pharma ETF, Axis Healthcare ETF and Edelweiss MSCI Ind Domestic & World Healthcare 45 (overseas and domestic hybrid).
Equity funds get Rs 8,600 cr inflows in Sep; 7th straight month of growth
In September, equity oriented mutual funds received a net inflow of Rs 8,677.42 crore, which was the seventh consecutive month of net inflows. Since March this year, equity funds have received a net inflow of Rs 68,551.24 crore, thus indicating towards positive sentiment among investors. Mutual fund monthly SIP contributions breached Rs 10,000 crore milestone for the first time ever and industry AUMs touched all time high at Rs 36.73 lakh crores is historic.
Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, said that positive sentiments and rally in the equity markets continue to attract investors into equity-oriented mutual funds. “Relatively lower returns from traditional investments have also made equity mutual funds attractive investment destination for investors. Additionally, with the SIP book growing consistently, equity oriented funds have been receiving robust flows.”
Equity oriented NFOs continue to attract investors thus garnering robust flows. During the month five equity oriented NFOs were launched which combined collected around Rs 6,579 crore, thus significantly contributing towards the net inflows.
Passively managed funds continue to attract investors’ interest on the back of sharp rally in the equity indices. Index funds and other ETF category recorded a net inflow of Rs 10,764 crore in September. What also added to the net inflow were four NFOs, two each in Index and other ETF category, which collected Rs 1,211 crore.
With all the segments of the market – Large, mid and small-caps doing well, expectedly, multi-cap category was the biggest beneficiary during the month, followed by focussed and flexi-cap categories.
Give the quarter end, Debt oriented funds, prominently with less than one-year maturity, witnessed net outflows, largely on account of advance tax payment in September. Overall, the segment witnessed a net outflow of Rs 63,910.23 crore, led by significant net outflows from liquid, ultrashort, low duration and money market categories.
“The expected return from equity remains higher than debt funds with a pause in reduction of interest rates by the RBI due to increased CPI inflation, amongst other reasons. Investors obviously see a better risk-return ratio by investing in equity funds and the churn is inevitable,” notes Waqar Naqvi, CEO at Taurus Mutual Fund.
Categories such as Medium Duration and Medium to Long Duration received net inflows thus indicating investors preference for fixed income funds at short to medium end of the curve. Credit funds continued to witness inflows on the back of improvement in scenario on the fixed income side. Lastly, Floater funds continue to receive net positive flows given the limited probability of interest moving down significantly. With a net inflow of Rs 5,814.04 crore, it was the biggest beneficiary in September among the debt-oriented categories.
It is also very encouraging to see much better inflows in dynamic/balance advantage funds as in current times of rising markets and premium valuations, this category of funds will allow to control risk of investors much more efficiently,” said Akhil Chaturvedi, Head of Sales & Distribution, Motilal Oswal AMC.
The good news on the SIP front continues with monthly input value finally crossing Rs 10,000 crore in September. “This is heartening as this is a significant jump from Rs.8,000 the SIP book had shrunk to a year back. This clearly highlights improving appetite from retail as well as HNIs,” points out Aashwin Dugal, Co Chief Business Officer, Nippon India Mutual Fund.
Commenting on the September 2021 monthly data, N S Venkatesh, Chief Executive, AMFI said: “Retail investors are preferring Mutual Funds, over low-yielding traditional savings avenue like Bank FDs, and also Gold and Real Estate. On the back of rapidly improving economic scenario aided by conducive RBI policy and easing of Covid related restrictions, equities asset class would continue to deliver superior risk adjusted returns.”
PSU bias makes equity funds chart-topper in September
The month of September was great for PSU stocks, perceived as value picks in a stock market that is trading historically at higher valuations. Naturally, equity funds that have big bets on PSU stocks reaped rich rewards. PSU stocks such as Oil India, IRCTC, Coal India, BHEL, NTPC, IDBI Bank, ONGC, NLC India, IFCI, Indian Overseas Bank, Shipping Corp, RCF, IOC etc. were among the winners in BSE 500 index. These stocks gained between 13-43 per cent in September alone, boosting the NAVs of equity funds. On the other side of the spectrum, international equity funds and pharma/healthcare funds had a forgettable month. Here are the details.
PSU portfolios get boost
CPSE ETF was the biggest gainer among the nearly 500 equity schemes in September. It gained 17.39 per cent in September, nearly double of the second best gaining equity fund. CPSE ETF, launched in March 2014, has seen more downs than ups in its nearly 7 year old track record. The product has big bets on PSU stocks such as Power Grid (PGCIL), ONGC, NTPC, Coal India, Bharat Electronics and NMDC.
Other schemes that performed exceedingly well in September include portfolios with high PSU bias. These include ICICI Pru Bharat 22 FOF (up 9.90 per cent), ICICI Pru India Opp (9.54 per cent), ICICI Pru Large & Midcap (8.54 per cent), Quant Infra (7.92 per cent), ABSL PSU Equity (7.90 per cent) and ICICI Pru Infrastructure (7.78 per cent), .
| 10 best equity funds in September 2021 | ||
| Fund Name | Sep-2021 (% gain) | Category |
| CPSE Exchange Traded Fund | 17.39 | EQ-PSU |
| ICICI Prudential BHARAT 22 FOF | 9.90 | EQ-LC |
| ICICI Prudential India Opportunities Fund | 9.44 | EQ-THEMATIC |
| BHARAT 22 ETF | 9.37 | EQ-LC |
| ICICI Prudential Large & Mid Cap Fund | 8.47 | EQ-L&MC |
| Aditya Birla Sun Life PSU Equity Fund | 7.79 | EQ-PSU |
| Quant Infrastructure Fund | 7.76 | EQ-INFRA |
| ICICI Prudential Infrastructure Fund | 7.72 | EQ-INFRA |
| Motilal Oswal Midcap 100 Exchange Traded Fund | 7.03 | EQ-MC |
| Baroda Midcap Fund | 6.81 | EQ-MC |
Category wise
In terms of equity funds category, the month of September brough smiles for some while it was agony for a few.
Banking equity funds gained an average 1.95 per cent, with Nippon India ETF PSU Bank BeES and Kotak PSU Bank ETF growing their NAV over 6 per cent each.
PSU funds had the biggest average gain of 8.02 per cent, partially because of a high gain in a few schemes that includes schemes already mentioned as well as Invesco India PSU Equity and SBI PSU Fund.
Consumption equity funds saw an average gain of 3.81 per cent, with ICICI Prudential Bharat Consumption and SBI Consumption Opportunities ruling the charts.
Tax-saving or ELSS funds saw an average gain of 3.11 per cent in September, with Parag Parikh Tax Saver and Quant Tax Plan performing the best among peers.
Infrastructure funds, with sizable allocation to PSUs, gained an average 4.47 per cent in September, with Quant Infrastructure and ICICI Prudential Infrastructure doing well.
International equity funds lost an average 2.5 per cent this month, with Aditya Birla Sun Life Commodity Equities – Global Agri Plan, DSP World Energy Fu and Nippon India Japan Equity being the worst performers.
Largecap funds, which consist among the biggest categories, saw an average gain of 2.7 per cent in September. Midcap funds reported an average gain of 4.16 per cent. Multicap funds saw an average 3.28 per cent gain while smallcap funds posted clocked nearly 5 per cent average gain in September.
Going ahead
In September, the mutual fund industry AUM is expected to continue its rising trajectory. The rally in the equity markets has been well diversified with sector rotation in play in the last few months.
Small cap funds staged a comeback after a brief period of underperformance. Small cap funds have been consistent performers since the market recovery post the Covid-19 pandemic induced fall last year.
Midcaps also followed small cap funds and have outperformed other categories.
IT funds have been consistent out performers in the last two to three years as the growth outlook improved for the sector in the post Covid world resulting in a valuation re-rating of most stocks.
Sectors or segments like infrastructure, PSUs, which lagged behind in the early part of the rally, have gained traction, showing the healthy trend of sector rotation.
Global funds have underperformed significantly in the last few months.
Multicap and flexicap funds are better placed for most investors in current environment where midcap and small cap funds have already outperformed significantly.
Axis MF enters Balanced Advantage Fund category by repositioning existing fund
Axis Mutual Fund has renamed and repositioned its existing fund (Axis Dynamic Equity Fund) to Axis Balanced Advantage Fund. Axis Balanced Advantage Fund (Axis BAF) is an open ended dynamic asset allocation fund which manages exposure actively between Equity and Fixed income. Here are all the details.
Highlights of change
* Axis Balanced Advantage is an open ended dynamic asset allocation fund
* Axis Balanced Advantage seeks to achieve dual objective of capital appreciation and income generation
* The fund will actively allocate between Equity and Fixed income based on market valuation and trend
* Fund Benchmark: NIFTY 50 Hybrid Composite Debt 50:50 Index
* Repositioning effective date: October 1, 2021
What is Axis Balanced Advantage
The asset allocation of the fund is guided by an in-house proprietary methodology, which allows the AMC to manage equity exposure in response to changes in underlying market conditions.
This dynamic nature makes it an ideal investment solution for all investors as the fund not only manages to navigate market volatility better but also focuses on wealth creation over the long term. The repositioning becomes effective from 1st October 2021 and with this Axis AMC aims to become a prominent player in the Balanced Advantage Fund category.
Why dynamic asset allocation
The inherent volatile nature of equities can sometimes lead to abnormality in price action in the near term. This can influence investor behaviour and lead investors to buy at market peaks and sell at market lows, causing massive wealth destruction. This very destruction can be mitigated if investors can be presented with a product that has intelligent risk management built in its core.
Axis Balanced Advantage Fund is aimed at finding a solution for this basic problem for investors. Through its proprietary methodology, it aims to dynamically manages Equity and Fixed Income exposure and tries to achieve the basic tenets of investing (Buy low, Sell High).
The balanced advantage fund (BAF)/dynamic asset allocation funds (DAA) category was created after SEBI’s new categorisation rules. Rules say these funds need to invest in equity/debt that is managed dynamically within a wide range of 0-100 per cent. But to target equity fund taxation, these hybrid funds usually maintain 65 per cent equity exposure on an average.
Investment approach
After the revision, Axis Balanced Advantage Fund will have greater flexibility to invest in a particular asset class with the minimum range of 0% to maximum range of 100% in both Equity and Fixed Income. The scheme also has the provision to invest 0% to 10% in units issued by REITs & InvITs.
While the in-house methodology guides the fund manager to allocation between asset classes, the stock selection is a complete bottom up process based on the Fund Managers view. The stocks picked in Axis Balanced Advantage Fund continue to remain backed by Axis Mutual Fund’s philosophy of focus on quality and will carry on looking for stocks that are expected to report faster growth than the relative benchmark (this includes sustainable earnings growth potential, credible management and acceptable liquidity), considering current times.
As such, the main differentiating factor among the two dozen funds in the versatile dyanmic asset allocation/balanced advantage category is their respective in-house model that guides how schemes switch between equity, equity-linked derivatives and debt. Since each fund differs in its call on equity market direction, this reflects on the risks and returns too. Hence, investors should develop a nuanced understanding of the category before deciding to use the BAF/DAA route to fine-tune their asset allocation needs.
Suitability
Axis Balanced Advantage Fund can be a part of an investors core allocation, irrespective of them being first timers or seasoned investors. The funds ability to manage asset allocation between equity and fixed income makes it an investment worthy for the long term.
Given their ability to adapt portfolios to various market scenarios, balanced advantage/dynamic asset allocation fund category (3-year downside capture ratio of 60 per cent) will not fall as much as hybrid aggressive fund category (downside capture ratio of over 100 per cent) . It is important for investors to look at consistency in BAF performance over various time periods before choosing one.
Fund-house speak
On this development, Chandresh Nigam, MD & CEO, Axis AMC said, “As investors, we all want to invest with the confidence that our investments will not fall prey to vagaries of market volatility. Balanced Advantage funds allow investors to mitigate equity risk through a structured process that manages equity exposure dynamically. We believe that Balanced Advantage funds will transform investing experience for investors and allow them to benefit from the long term growth potential of equity while managing its risk.â€
NFO review: Mahindra Manulife Asia Pacific REITs FOF
For those looking to diversify beyond domestic stocks, here is an alternative. But unlike the options that ask you to bet on US stocks, this product is truly different. Mahindra Manulife MF has launched Mahindra Manulife Asia Pacific REITs FOF, an open-ended fund of fund scheme investing in Manulife Global Fund – Asia Pacific REIT. REIT stands for real estate investment trusts. The NFO will close on October 12, 2021. Here are more details.
Investment objective, asset allocation
The investment objective of Mahindra Manulife Asia Pacific REITs FOF is to provide long-term capital appreciation by investing predominantly in units of Manulife Global Fund – Asia Pacific REIT Fund, an overseas fund primarily investing in real estate investment trusts (REITs) in the Asia Pacific ex-Japan region.
International REITs are a great way to diversify a portfolio and build exposure to real estate markets worldwide. Apart from this NFO, the only other comparable product is Kotak International REIT FOF, which was launched in Dec-2020. Kotak REIT FOF’s 6-mopnth performance has been a mere 1.59% compared to the index S&P BSE 500 TRI’s 22.39%.
Here is an idea of the asset allocation pattern of the scheme under normal circumstances. A 95-100% of money would be invested in Units / shares of Manulife Global Fund – Asia Pacific REIT Fund. The balance 0-5% would be invested in debt and money market securities (including TREPS (Tri-Party Repo), reverse repo) and/or units of liquid schemes.
The scheme will not invest in derivatives. However, the underlying fund may invest in derivatives for effective portfolio management and hedging purposes.
About the underlying fund
Mahindra Manulife Asia Pacific REITs is a fund of fund. This means the scheme will invest into the underlying fund i.e. Manulife Global Fund – Asia Pacific REIT Fund. This is one of the sub-funds under Manulife Global Fund, a Luxembourg-domiciled open ended investment company.
The sub-fund will invest at least 70% of its net assets in REITs constituted in and/or traded in and/or primarily invested in underlying assets in the Asia Pacific ex-Japan region, each of which is closed-ended and listed on any regulated market. The remaining assets of the sub-fund may be invested in real estate-related securities listed on any regulated market in the Asia Pacific ex-Japan region, closed-ended non-Asia Pacific ex-Japan REITs listed on any regulated market, and cash and cash equivalents.
As on July 31, 2021, the top holdings of Manulife Global Fund – Asia Pacific REIT Fund were Link Real Estate Investment Trust 8.11%, CapitaLand Integrated Commercial Trust 7.73%, Ascendas Real Estate Investment Trust 7.64%, Mapletree Logistics Trust 5.04%, Frasers Logistics & Commercial Trust 4.83%, Mapletree Commercial Trust 4.45%, Mapletree Industrial Trust 3.91%, Fortune Real Estate Investment Trust 3.54%, Frasers Centrepoint Trust 3.50% and Mapletree North Asia Commercial Trust 3.49%.
In terms of sectoral break-up of the underlying fund portfolio, 16% is in industrial, the rest real estate equity REITs (10.4% diversified, 2.75% hotel & resort, 25.85% industrial, 7.52% office, 30.18% retail and 2.79% specialized) etc. Some money was in cash. In terms of country allocation, Australia has 10.69%, China 11.90%, Hong Kong 13.94%, Philippines 1.63%, Singapore 57.63% and Thailand 1.56%.
In terms of performance, Manulife Global Fund – Asia Pacific REIT over 1 year ended July 2021 gave 9.12% return. It does not have a long track record.
NFO details
Minimum application amount – Rs. 5,000 and in multiples of Re. 1/- thereafter; minimum additional purchase amount Rs. 1,000; SIP allowed
Benchmark – FTSE EPRA Nareit Asia ex Japan REITs Index
Fund options – Direct and Regular
Exit load – 10% of the units allotted shall be redeemed without any exit load, on or before completion of 24 months from the date of allotment of Units. Any redemption in excess of the above limit shall be subject to an exit load of 1% is payable if units are redeemed / switched-out on or before completion of 12 months from the date of allotment of Units and an exit load of 0.5% is payable if Units are redeemed/ switched-out between 12 month to 24 month for the date of allotment of units. There will be no exit load if units are redeemed / switched-out after completion of 24 months from the date of allotment of units.
Axis Dynamic Equity Fund becomes Balanced Advantage Fund
Axis Mutual Fund has renamed and repositioned its existing fund (Axis Dynamic Equity Fund) to Axis Balanced Advantage Fund. Axis Balanced Advantage Fund (Axis BAF) is an open ended dynamic asset allocation fund which manages exposure actively between Equity and Fixed income. Here are all the details.
Highlights of change
* Axis Balanced Advantage is an open ended dynamic asset allocation fund
* Axis Balanced Advantage seeks to achieve dual objective of capital appreciation and income generation
* The fund will actively allocate between Equity and Fixed income based on market valuation and trend
* Fund Benchmark: NIFTY 50 Hybrid Composite Debt 50:50 Index
* Repositioning effective date: October 1, 2021
What is Axis Balanced Advantage
The asset allocation of the fund is guided by an in-house proprietary methodology, which allows the AMC to manage equity exposure in response to changes in underlying market conditions.
This dynamic nature makes it an ideal investment solution for all investors as the fund not only manages to navigate market volatility better but also focuses on wealth creation over the long term. The repositioning becomes effective from 1st October 2021 and with this Axis AMC aims to become a prominent player in the Balanced Advantage Fund category.
Why dynamic asset allocation
The inherent volatile nature of equities can sometimes lead to abnormality in price action in the near term. This can influence investor behaviour and lead investors to buy at market peaks and sell at market lows, causing massive wealth destruction. This very destruction can be mitigated if investors can be presented with a product that has intelligent risk management built in its core.
Axis Balanced Advantage Fund is aimed at finding a solution for this basic problem for investors. Through its proprietary methodology, it aims to dynamically manages Equity and Fixed Income exposure and tries to achieve the basic tenets of investing (Buy low, Sell High).
The balanced advantage fund (BAF)/dynamic asset allocation funds (DAA) category was created after SEBI’s new categorisation rules. Rules say these funds need to invest in equity/debt that is managed dynamically within a wide range of 0-100 per cent. But to target equity fund taxation, these hybrid funds usually maintain 65 per cent equity exposure on an average.
Investment approach
After the revision, Axis Balanced Advantage Fund will have greater flexibility to invest in a particular asset class with the minimum range of 0% to maximum range of 100% in both Equity and Fixed Income. The scheme also has the provision to invest 0% to 10% in units issued by REITs & InvITs.
While the in-house methodology guides the fund manager to allocation between asset classes, the stock selection is a complete bottom up process based on the Fund Managers view. The stocks picked in Axis Balanced Advantage Fund continue to remain backed by Axis Mutual Fund’s philosophy of focus on quality and will carry on looking for stocks that are expected to report faster growth than the relative benchmark (this includes sustainable earnings growth potential, credible management and acceptable liquidity), considering current times.
As such, the main differentiating factor among the two dozen funds in the versatile dyanmic asset allocation/balanced advantage category is their respective in-house model that guides how schemes switch between equity, equity-linked derivatives and debt. Since each fund differs in its call on equity market direction, this reflects on the risks and returns too. Hence, investors should develop a nuanced understanding of the category before deciding to use the BAF/DAA route to fine-tune their asset allocation needs.
Suitability
Axis Balanced Advantage Fund can be a part of an investors core allocation, irrespective of them being first timers or seasoned investors. The funds ability to manage asset allocation between equity and fixed income makes it an investment worthy for the long term.
Given their ability to adapt portfolios to various market scenarios, balanced advantage/dynamic asset allocation fund category (3-year downside capture ratio of 60 per cent) will not fall as much as hybrid aggressive fund category (downside capture ratio of over 100 per cent) . It is important for investors to look at consistency in BAF performance over various time periods before choosing one.
Fund-house speak
On this development, Chandresh Nigam, MD & CEO, Axis AMC said, “As investors, we all want to invest with the confidence that our investments will not fall prey to vagaries of market volatility. Balanced Advantage funds allow investors to mitigate equity risk through a structured process that manages equity exposure dynamically. We believe that Balanced Advantage funds will transform investing experience for investors and allow them to benefit from the long term growth potential of equity while managing its risk.â€
NFO review: Motilal Oswal 5 year G-Sec Fund of Fund
Motilal Oswal Asset Management Company (MOAMC) has announced the launch of its Motilal Oswal 5 Year G-sec Fund of Fund. Known for launching an array of passive funds, this low cost open-ended fund of fund scheme will be investing in the units of Motilal Oswal 5 Year G-Sec ETF. Here are the key details about the offering.
NFO timings
The NFO of Motilal Oswal 5 Year G-sec Fund of Fund opened on September 24 and shall close on September 30.
The Motilal Oswal 5 year G-Sec Fund of Fund seeks investment return through investment in units of Motilal Oswal 5 Year G-Sec ETF.
The minimum application amount during NFO is Rs 500.
What’s so special
Motilal Oswal 5 Year G-Sec FoF is an open ended fund of funds scheme investing in units of Motilal Oswal 5 Year G-Sec ETF.
Here are the 5 benefits:
Low Risk: Exposure to Government backed securities
Liquid: Underlying G-Sec is one of the most liquid security
Economical: Invests into low cost passive fund
Balanced Tenure: Falls in a sweet spot between short & long duration
Simple: Easy access to Govt Debt Security
“The underlying G-Sec is one of the most liquid security with a cushioning of ‘No default’ risk.†said Pratik Oswal, Head of Passive Funds, Motilal Oswal Asset Management Company Ltd. “Given the duration of Nifty 5 Yr. Benchmark G-Sec Index, it falls in the sweet spot between short and long duration G-Sec.â€
Costs
The indicative total expense ratio of Regular plan Fund of Fund is 0.10% per annum and of Direct plan Fund of Fund is 0.03% per annum.
What else
With no lock-in, indexation benefit, and historical higher pre & post tax returns over Fixed Deposits, the Nifty 5 year Benchmark G-Sec Index can be good alternative to traditional Fixed Deposits.
As per current regulations, the Motilal Oswal 5 Year G-Sec Fund of Fund is treated as a ‘non-equity’ fund and consequently taxed similar to a debt scheme.
If the investment is held for more than 3 years it qualifies for Long Term Capital Gains Tax @ 20%, along with option to avail indexation benefit. Any investment horizon lower than 3 years would attract the Short Term Capital Gain Tax and taxed as per the applicable tax bracket.
Fund Manager of the FoF is Abhiroop Mukherjee, who has 14 years of experience in fund management and product development.
Fund-house speak
“The launch of Motilal Oswal 5 Year G-Sec Fund of Fund is in response to growing demand from investors who do not have Demat or Trading accounts. With low correlation to equities, this Fund of Fund is ideal for investors looking for capital preservation with reduced portfolio volatility.†said Navin Agarwal, MD & CEO, Motilal Oswal AMC.
Exit load
Exit Load of 1% will be applicable if redeemed on or before 15 days from the date of allotment.
There is no exit load if investment redeemed after 15 days from the date of allotment.
