The
markets off late has been very volatile due to multiple domestic and global
factors. This was accompanied with sharp corrections in several pockets, a
development which investors who entered the market over the last three year
have not seen. Therefore, it is natural to get apprehensive about investing in
such a market. But what if there is product designed to take advantage of such
volatility? Because, when it comes to equity investing one can’t wish away
volatile markets.
This
is where ICICI Prudential Balanced Advantage Fund (BAF) comes into the picture.
The fund has been a pioneer in the Balanced Advantage category of schemes and
has a stellar track record. Launched in December
2006, the Fund as of April 30, 2018, has assets under management (AUM)
tallied at Rs 27,123 crore, and is the largest in its category. The fund is
jointly managed by SankaranNaren (lead
fund manager for equity portion) and Manish Banthia (debt portion).
Over
the last few years, the popularity of the fund has shot up among retail
investors. This is mainly on account of the stability in the returns generated
and the defensive nature of the product which make it an ideal investment
choice for investors with moderate risk appetite.
What BAF stands for
The
investment strategy of ICICI Prudential Balanced Advantage Fund is to invest
the corpus across equity and debt asset classes, based on market valuation. This
would mean that the fund manager would reduce positions in best-performing
asset class, while adding in underperforming assets, thereby making the most of
the market opportunities. For doing so, the Scheme uses an in-house model, based
on a long-term historical mean Price to Book Value (P/BV), with a view to limit
the downside risk during a falling market, while aiming to capture the upside
in a rising market, which is But Low, Sell High, as can be seen in the chart
below.
Source:
NSE India & MFIE, As on 30th April, 2018. The in-house valuation model
starts from March 2010 onwards.
The
portfolio currently is a blend of large and mid-cap stocks. While the large cap
stocks represent established enterprises selected from the Top 100 stocks by
market capitalization, the mid- and small-caps represent business entities with
long-term growth potential. The allocation is decided on a tactical basis
rather than any predefined ratio. Also, derivative instruments for the purpose
of hedging or portfolio rebalancing for any other stock and/or index strategies
is used. Thus far, the Fund has managed to execute this mandate expertly, as can
be seen from the table below.
|
Particulars
|
1-year Return CAGR %
|
3-year Return CAGR %
|
5-year Return CAGR %
|
Since Inception CAGR %
|
|
ICICI
Prudential Balanced Advantage Fund
|
9.57
|
9.31
|
14.78
|
11.23
|
|
Benchmark:
CRISIL Hybrid 35+65 – Aggressive Index
|
10.05
|
9.12
|
13.46
|
10.18
|
The
Fund has thus far managed to blunt the extremes of the market thereby
generating returns in an upward trending market while protecting the downside
in a downward trending market. Given the fund's extensive track record, it has
experienced various market phases, and has outperformed the benchmark across
all market phases.
Benefits of investing in BAF
1. Offer diversification across equity and
fixed income, which reduces risk
2. Offer better risk adjusted returns
3. Offer automatic rebalancing of the
asset allocation within a portfolio based on market dynamics
4. Offer a less volatile investment option
Given the nature of the product, it is designed to be a
go-to fund across all phases of the market, thanks to dynamic asset allocation.
Hence such a fund should be considered as a part of one’s core portfolio. Also,
for lump sum investment in the current market scenario, this is one fund which
stands to gain from the volatile times. Hence, BUY rating.
2018
Wed, Jun 13
No comments:
Post a Comment