- Date : 28/03/2023
- Read: 3 mins
Quant MF's Balanced Advantage Fund (BAF) offers dynamic asset allocation in equity and debt instruments, targeting traditional investors with a preference for fixed-income returns and low volatility.
Quant Money Managers have unveiled a dynamic new open-ended asset allocation fund: the Balanced Advantage Fund (BAF). This fund aims to provide steady returns to investors by diversifying across both equity and debt instruments.
BAFs are a hot commodity in India's Rs. 40 lakh crore mutual fund sector, with assets under management valued at Rs. 1.91 lakh crore as of the end of February.
A Unique Offering in Asset Allocation Funds
What sets Quant's Dynamic Asset Allocation Fund (QDAAF) apart from other asset allocation funds is its lack of restrictions on equity exposure. Unlike the typical 65% minimum equity exposure required by most funds in this category, QDAAF has no such constraint.
Also Read: How good is Quant Small Cap Mutual Fund?
Currently, there are around 30 DAAs/BAFs on the market, but the majority limit their equity exposure to between 65% and 100% and their debt exposure to a maximum of 35%. This makes QDAAF an appealing choice for traditional investors who prefer fixed-income returns and have a low tolerance for volatility.
By dynamically rebalancing the portfolio based on current macroeconomic conditions, risk appetite, and liquidity for each asset class, the scheme seeks to optimise returns.
A Fresh Approach to Investment
Quant's Balanced Advantage Fund offers a novel investment strategy, with the potential to invest up to 100% of its assets in debt securities, depending on market conditions. In periods like March-April 2020, the fund might have opted to allocate 100% exposure to equity.
The fund mainly focuses on overnight, liquid, shorter-duration bonds and shorter government security funds.
The CRISIL Hybrid 50+50 Moderate Index serves as the scheme's benchmark. Additionally, there's no exit load, and the direct plan's expense ratio starts at 50 basis points plus taxes.
Potential Advantages and Challenges
QDAAF's ability to invest up to 100% in fixed-income securities may prove beneficial for the fund, as high equity exposure has hampered the returns of many other BAFs.
Harshad Chetanwala, the co-founder of MyWealthGrowth.com, believes that launching in a debt-friendly environment could benefit QDAAF over the next year, although stock market uncertainty may present equity investment opportunities.
Also Read: Which Mutual Funds are Risky and Why you should avoid Investing in those Mutual Funds?
However, the fund's lack of a specific model may introduce some risk and vulnerability to funding managers' biases. Moreover, debt-like taxation and high turnover rates in quantitative mutual fund schemes could deter some investors.
The recent Finance Bill 2023 amendments also classify debt funds investing less than 35% in Indian company equity shares as short-term capital gains, which could impact the new fund.
What Investors Should Consider
It's crucial for investors to realise that not all DAAs or BAFs operate in the same manner. Quant MF's Balanced Advantage Fund (QDAAF) approach to transitioning between stocks and bonds over time remains uncertain. As such, investors should only evaluate funds in this category after examining their track records.
The success of these funds hinges not only on stock selection but also on how effectively the model interprets the markets and allocates capital between equity and fixed-income markets. Before investing in a new scheme, consider reviewing existing DAA/BAF plans with proven track records.
Quant MF's innovative Balanced Advantage Fund offers a dynamic approach to asset allocation with no minimum equity exposure limitations. Catering to traditional, low-risk investors, this fund presents an attractive option.
However, potential drawbacks, such as debt-like taxation and high turnover rates, should be considered. It's vital to evaluate funds in this category based on their performance and market history.
Quant Money Managers have unveiled a dynamic new open-ended asset allocation fund: the Balanced Advantage Fund (BAF). This fund aims to provide steady returns to investors by diversifying across both equity and debt instruments.
BAFs are a hot commodity in India's Rs. 40 lakh crore mutual fund sector, with assets under management valued at Rs. 1.91 lakh crore as of the end of February.
A Unique Offering in Asset Allocation Funds
What sets Quant's Dynamic Asset Allocation Fund (QDAAF) apart from other asset allocation funds is its lack of restrictions on equity exposure. Unlike the typical 65% minimum equity exposure required by most funds in this category, QDAAF has no such constraint.
Also Read: How good is Quant Small Cap Mutual Fund?
Currently, there are around 30 DAAs/BAFs on the market, but the majority limit their equity exposure to between 65% and 100% and their debt exposure to a maximum of 35%. This makes QDAAF an appealing choice for traditional investors who prefer fixed-income returns and have a low tolerance for volatility.
By dynamically rebalancing the portfolio based on current macroeconomic conditions, risk appetite, and liquidity for each asset class, the scheme seeks to optimise returns.
A Fresh Approach to Investment
Quant's Balanced Advantage Fund offers a novel investment strategy, with the potential to invest up to 100% of its assets in debt securities, depending on market conditions. In periods like March-April 2020, the fund might have opted to allocate 100% exposure to equity.
The fund mainly focuses on overnight, liquid, shorter-duration bonds and shorter government security funds.
The CRISIL Hybrid 50+50 Moderate Index serves as the scheme's benchmark. Additionally, there's no exit load, and the direct plan's expense ratio starts at 50 basis points plus taxes.
Potential Advantages and Challenges
QDAAF's ability to invest up to 100% in fixed-income securities may prove beneficial for the fund, as high equity exposure has hampered the returns of many other BAFs.
Harshad Chetanwala, the co-founder of MyWealthGrowth.com, believes that launching in a debt-friendly environment could benefit QDAAF over the next year, although stock market uncertainty may present equity investment opportunities.
Also Read: Which Mutual Funds are Risky and Why you should avoid Investing in those Mutual Funds?
However, the fund's lack of a specific model may introduce some risk and vulnerability to funding managers' biases. Moreover, debt-like taxation and high turnover rates in quantitative mutual fund schemes could deter some investors.
The recent Finance Bill 2023 amendments also classify debt funds investing less than 35% in Indian company equity shares as short-term capital gains, which could impact the new fund.
What Investors Should Consider
It's crucial for investors to realise that not all DAAs or BAFs operate in the same manner. Quant MF's Balanced Advantage Fund (QDAAF) approach to transitioning between stocks and bonds over time remains uncertain. As such, investors should only evaluate funds in this category after examining their track records.
The success of these funds hinges not only on stock selection but also on how effectively the model interprets the markets and allocates capital between equity and fixed-income markets. Before investing in a new scheme, consider reviewing existing DAA/BAF plans with proven track records.
Quant MF's innovative Balanced Advantage Fund offers a dynamic approach to asset allocation with no minimum equity exposure limitations. Catering to traditional, low-risk investors, this fund presents an attractive option.
However, potential drawbacks, such as debt-like taxation and high turnover rates, should be considered. It's vital to evaluate funds in this category based on their performance and market history.
