Investing in a mutual fund scheme carries a slew of risks and reward. Most investors tend to select schemes with an intent to earn maximum profit and a high return on their investment. Although it is not rational to compare an apple with an orange, it is — however — universally acceptable to map the returns of a mutual fund scheme to those of its benchmark index.
Consequently, beating the benchmark index returns is one of the key goals of fund managers, particularly in active mutual fund schemes.
Here we give the lowdown on balanced advantage funds (also known as dynamic asset allocation funds) which have managed to beat the 3-year returns of benchmark index i.e., NIFTY 50 Hybrid Composite debt 50:50 Index.
The 3-year-returns of benchmark index stood at 12.37 percent per annum.
What are balanced advantage funds?
Balanced advantage funds are a type of hybrid funds which invest across sectors including equity funds, real estate, stocks and bonds and change their allocation from time to time.
In these funds, the fund manager tends to switch 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.
They are highly diversified in nature, and are considered best suited during an uncertain market.
As we can see in the table below, HDFC Balanced Advantage Fund delivered a return of 17.64 percent in past three years against the benchmark return of 12.37 percent.
Other fund schemes that could beat the benchmark index are Baroda BNP Paribas Balanced Advantage Fund that gave a return of 15.19 percent, Edelweiss Balanced Advantage Fund with 14.40 percent return and Sundaram Balanced Advantage Fund with 14.02 percent return.
|Balanced advantage funds||3-yr-returns (%)|
|HDFC Balanced Advantage Fund||17.64|
|Baroda BNP Paribas Balanced Advantage Fund||15.19|
|Edelweiss Balanced Advantage Fund||14.40|
|Sundaram Balanced Advantage Fund||14.02|
(Source: AMFI; direct returns as on November 17)
However, it is worth noting that some of these funds did not beat the benchmark during the five-year period. For instance, as we can see in the table below, HDFC’s fund lagged the benchmark index returns marginally, Edelweiss’ fund return could beat, but only just.
|Balanced advantage funds||5-year-returns (%)||Benchmark (%)|
|HDFC Balanced Advantage Fund||10.84||10.87|
|Edelweiss Balanced Advantage Fund||10.92||10.87|
|Sundaram Balanced Advantage Fund||9.30||10.87|
At the same time, Sundaram Balanced Advantage Fund failed to beat the five-year returns of benchmark index, as per the AMFI data as on November 17.
Since Baroda BNP Paribas Balanced Advantage Fund was launched less than five years ago (Nov 2018), it does not have five-year return data.
(Note: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment related decision.)