Mirae Asset Mutual Fund has introduced the launch of Mirae Asset Balanced Advantage Fund. It is an open-ended dynamic asset allocation fund. The new fund offer (NFO) of the fund opens for subscription on July 21 and closes on August 3, 2022.
Before we proceed, let us first deconstruct the concept of a new fund offer.
New Fund Offer
A New Fund Offer (NFO) is the process through which an asset management company (AMC) creates a new fund on a first-subscription basis to facilitate the purchase of securities.
The fund house collects funds from the general public through an NFO in order to buy securities such as equity shares, bonds, and other financial instruments on the market. As a newcomer to the market, NFO is less expensive than the current funds.
The benchmark Index for the Mirae Asset Balanced Advantage fund will be the Nifty 50 Hybrid Composite Debt 50:50 Index. The minimum initial investment in the fund will be ₹5,000 and multiples of Re 1 thereafter. The fund will be jointly managed by Harshad Borawake and Mahendra Jajoo.
The fund will be available to investors in both, Regular Plan and Direct Plan. Post NFO, the minimum additional purchase amount will be ₹1000 and in multiples of Re 1 thereafter.
According to the press release, the fund aims to capture the upside during a bull market and limit the downside during bear phases. The fund managers will follow an internal model based on adjusted PE (Price to Earnings) and PBV (Price to Book Value) ratio in equities, and a buy and hold strategy in debt allocation.
Swarup Mohanty, CEO, Mirae Asset Investment Managers (India) said, "Investors fear falling markets. But in a country like India, not participating in the equities markets could be a matter of regret in the long run. Mirae Asset Balanced Advantage Fund seeks to preserve investor participation throughout the market cycles and aims to generate reasonable performance over the long run.”
He added, “The AMC has been offering product suites designed to address the needs of investors keeping in mind the risk-reward factor, and Mirae Asset Balanced Advantage Fund is a continuation of this process aimed at offering the right kind of investment solutions.”
The investment objective of the scheme is to capitalize on the potential upside of equities while attempting to limit the downside by dynamically managing the portfolio through investment in equity & equity related instruments and active use of debt, money market instruments and derivatives. However, there is no assurance or guarantee that the investment objective of the scheme will be realized, according to the AMC.
The fund follows a fundamental approach to assess equity market valuations at any given point of time to ascertain the desired net equity position of the fund.
The fund therefore endeavors to provide an optimum equity market participation for an investor. The net equity and arbitrage position exposure helps to achieve equity capital gains taxation for the investor at all points of time. The debt exposure endeavors to provide an income approach to the fund.
The fund attempts to provide a risk adjusted return experience while smoothening the volatility by actively managing the net equity position in the fund.
Ten balanced advantage funds that demonstrated best performance in 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.