Franklin Templeton Mutual Fund is set to launch the new fund offer (NFO) on August 16 namely Franklin India Balanced Advantage Fund (FIBAF). The fund will remain open for subscription until August 30. This scheme is suitable for those who want to reduce the impact of market volatility.
After a gap of two and half years, this will be Franklin Templton’s first mutual fund scheme after it decided to shut six debt schemes in April 2022.
Before we proceed, let us first deconstruct what are balanced advantage funds.
What are balanced advantage funds?
Dynamic Asset Allocation Funds, commonly referred to as balanced advantage funds, generally invest in a variety of securities including debt, equities, and arbitrage opportunities. To give you the best returns with the least amount of risk, they continuously adjust this allocation based on the state of the market. These funds base their choice of equity exposure on major market ratios.
Balanced advantage funds can be the best option for achieving your medium to long-term goals if you don't like high risk investments because they have the potential to generate respectable returns over the long term and are tax-efficient when compared to assured income products or fixed income funds.
Looking back
In 2020, due to lack of liquidity in debt markets, Franklin Templeton India shocked investors by abruptly shutting six of its debt funds after facing massive redemptions and illiquid portfolios.
However, the legal battle surrounding the winding up of six debt schemes is still ongoing in the Securities Appellate Tribunal (SAT). Previously, the Securities and Exchange Board of India (SEBI) had levied hefty fines on the fund house and asked to return the fund management fees levied in all the six shut schemes.
After 2020, the new scheme will be Franklin Templeton's second innings as the regulatory body had barred the fund house from launching any new debt scheme for two years.
Fund overview
Franklin India Balanced Advantage Fund offers tactical allocation between equity and debt based on market valuations and fundamental factors-driven views. It is a dynamically-managed fund, whose equity exposure will be maintained between 65 percent and 100 percent. If the equity allocation falls below 65 percent, the gross equity exposure will be maintained using equity derivatives. Debt instruments will make up for the rest.
Avinash Satwalekar, President, Franklin Templeton–India, said, “ This new fund is for investors looking for a balanced exposure to equity and debt over the long term while also capitalising on opportunities provided by the market from time to time. Apart from the benefits of diversification, this formula-driven approach with its in-built ‘buy-sell’ discipline helps to negate the behavioural biases caused due to emotions of greed and fear.”
Ten balanced advantage funds that demonstrated the best performance in the past three years
| Name of the schemes | 3 year trailing returns (%) |
| Baroda BNP Paribas Balanced Advantage Fund-Reg(G) | 13.91 |
| HDFC Balanced Advantage Fund(G) | 13.48 |
| ICICI Pru Balanced Advantage Fund(G) | 11.98 |
| Tata Balanced Adv Fund-Reg(G) | 11.81 |
| Union Balanced Advantage Fund-Reg(G) | 11.16 |
| Aditya Birla SL Balanced Advantage Fund(G) | 10.56 |
| Kotak Balanced Advantage Fund-Reg(G) | 10.49 |
| Nippon India Balanced Advantage Fund(G) | 9.9 |
| IDFC Balanced Advantage Fund-Reg(G) | 9.27 |
| Bank of India Balanced Advantage Fund-Reg(G) | 8.93 |
(Source - FundsIndia, July 21, 2022)
The top-performing balanced advantage funds, gave direct returns in the range of 8-13 percent as shown in the table below. Baroda BNP Paribas Balanced Advantage Fund gave 13.91 percent, HDFC Balanced Advantage Fund gave 13.48 percent and ICICI Pru Balanced Advantage Fund gave 11.98 percent return.
