Before investing in a mutual fund, investors tend to weigh the pros and cons of that scheme across parameters. A slew of determinants that go into evaluating the scheme’s worth include the category of scheme, reputation of fund houses, past record of fund manager and importantly — the historical CAGR (compound annual growth rate) returns of that scheme.
Here we shed light on the best dynamic asset allocation funds, also known as balanced advantage funds, based on their past five-year returns. But before we proceed, let us first describe what are dynamic asset allocation funds.
What are dynamic asset allocation funds?
Dynamic asset allocation mutual funds are a type of hybrid funds that invest across sectors including equity funds, real estate, stocks and bonds and change their allocation from time to time.
These mutual funds are highly diversified in nature, and they are less vulnerable to suffer losses during a bearish phase. They are best suited during an uncertain market. They invest not only in equity, but also in real estate and bond markets.
In these funds, the fund manager keeps on switching their allocation to the respective asset class based on the market movements. For instance, when the fund manager feels that equity valuations are attractive then the allocation to equities is raised and the corresponding allocation to debt is reduced.
According to the AMFI (Association of Mutual Funds in India) data, there are 29 dynamic asset allocation mutual fund schemes with net assets under management (AUMs) amounting to ₹1.96 lakh crore as on Apr 30, 2023, out of which ₹2,964 were invested in April alone.
A year ago, there were 25 schemes in this category with net assets under management of ₹1.80 lakh crore as on Apr 30, 2022.
|Dynamic asset allocation funds||5-year returns (%)|
|HDFC Balanced Advantage Funds||13.18|
|Edelweiss Balanced Advantage Funds||10.91|
|ICICI Prudential Balanced Advantage Funds||10.17|
(Source: AMFI, data as on May 30, 2023)
As we can see in the table above, there are three mutual fund schemes that have given a CAGR (compound annual growth rate) return of over 10 percent in the past five years.
These include Edelweiss Balanced Advantage Fund that has delivered a return of 10.91 percent, HDFC Balanced Advantage Fund gave a return of 13.18 percent, and ICICI Prudential Balanced Advantage Fund gave a five-year return of 10.17 percent per annum.
Let us share more details on some of these schemes:
HDFC Balanced Advantage Fund: It was launched on Feb 1, 1994. It has given a return of 13.18 percent since inception. Its key constituent stocks include HDFC Bank, SBI, ICICI Bank, Coal India, ITC, NTPC, RIL, Infosys, HDFC and L&T.
Edelweiss Balanced Advantage Fund: It was launched on Aug 20, 2009. This has given a CAGR return of 10.19 percent. This means if someone had invested ₹10,000 at the time of scheme's launch, it would have grown to ₹38,230 by now.
The key constituent stocks include ICICI Bank, RIL, HDFC Bank, HDFC, ITC and Axis Bank.
ICICI Prudential Balanced Advantage Fund: It was launched on Dec 30, 2006. The scheme has given a return of 10.82 percent (as on Apr 28, 203) since the scheme’s inception.
This means if someone had invested ₹10,000 at the time of scheme's launch, it would have been ₹53,550 by now.
The key constituent stocks are RIL, GOI Floater 2033, ICICI Bank, HDFC Bank, GOI Floater, Infosys, HDFC, TVS Motor Company, Bharti Airtel and Embassy Office Parks REIT.