Investors’ sentiment are as changeable as the cycles in equity markets, which are volatile by nature and fluctuate as part of a particular market cycle and shifts in macro-economic conditions. If investments are driven by emotions or biases, the investor might suffer capital loss from unworthy investments, ad-hoc decisions, and inappropriate asset allocation.

Many a times, investors end up with a higher exposure to equities when they focus on earning higher returns rather than portfolio balance, stability, and risk management. This increases the chance of your portfolio underperforming in unpredictable market conditions. Many risk-averse investors are now willing to invest in equities after the market outperformance in recent times.

In addition, young investors with years ahead of them to achieve their financial goals are looking for investment solutions that could provide downside protection without compromising on the return potential.

Mutual funds offer a category called Balanced Advantage Funds that provide capital appreciation with an allocation to equities while maintaining portfolio stability through debt.

Balanced Advantage Funds aim to generate capital gains, primarily through dynamic management of equity allocation as per varying market conditions; as well as provide stability and regular income through exposure to fixed income instruments. Dynamically managed debt and equity portion of such funds help in reducing the volatility when the equity markets turn unfavourable.

Investing in these funds can prove to be beneficial for conservative investors looking for a dynamic solution with the right mix of equity and debt with a minimum investment horizon of 3 years. SBI Mutual Fund has launched SBI Balanced Advantage Fund. It is an open-ended dynamic asset allocation fund.

On the launch of this Mr Vinay M. Tonse, MD and CEO of SBI Mutual Fund said, “We are happy to launch SBI Balanced Advantage Fund at a very opportune time, when equity markets are primarily getting driven by ample global liquidity. Our new fund offering would follow a 3-tier investment strategy to evaluate the optimal asset allocation across equity and debt based on robust economic and market indicators. SBI Balanced Advantage Fund would help investors to fulfil their asset allocation needs and I am confident that the fund would be a very suitable investment option for investors, particularly those who are risk-averse but at the same time are looking for long term wealth creation and want to cushion their investments from volatile market situations.”

Table 1: Details of SBI Balanced Advantage Fund

Type An open-ended dynamic asset allocation fund Category Balanced Advantage Fund
Investment Objective To provide long term capital appreciation / income from a dynamic mix of equity and debt investments. However, there can be no assurance that the investment objective of the Scheme will be realized.
Min. Investment Rs 5,000 and in multiples of Re 1/-thereafter with no upper limitAdditional Purchase Rs 1000/- and in multiples of Re 1/- thereafter Face Value Rs 10/- per unit
SIP/STP/SWP Available
  • Direct
  • Regular
  • Growth
  • Income Distribution cum capital withdrawal (IDCW)
Entry Load Not Applicable Exit Load
  • NIL – If units purchased or switched in from another scheme of the Fund are redeemed or switched out up to 10% of the units, (the limit) purchased or switched on or before 1 year from the date of allotment.
  • 1% of the applicable NAV – If units purchased or switched in from another scheme of the Fund are redeemed or switched out in excess of the limit on or before 1 year from the date of allotment
  • NIL – If units purchased or switched in from another scheme of the Fund are redeemed or switched out after 1 year from the date of allotment
Fund Manager
  • Mr Gaurav Mehta
  • Mr Dinesh Balachandran
  • Mr Dinesh Ahuja
  • Mr Mohit Jain
Benchmark Index CRISIL Hybrid 50+50 – Moderate Index TRI
Issue Opens: August 12, 2021 Issue Closes: August 25, 2021

(Source: Scheme Information Document

The investment strategy for SBI Balanced Advantage Fund will be as follows:

SBI Balanced Advantage Fund endeavours to provide long-term capital appreciation/income from a mix of equity and debt investments. The debt-equity mix at any point of time will be a function of various factors such as equity valuations, interest rates, view on the asset classes and risk management, etc.

The scheme aims to follow a Three-tiered investment strategy:

Tier 1 (Right asset mix): Asset allocation will be decided by the Fund Managers, using parameters such as Sentiment Indicator, Valuations, and Earnings Drivers.

Tier 2 (Strategy tilt): Quantitative framework will be used for strategy tilt. It will determine market cap allocation, style skewness – Value/ Growth/Quality and sector preference.

Tier 3 (Stock/security selection): It will focus on constructing a portfolio in such a manner that alpha is generated through equity, while it aims for stability through debt.

The scheme will aim to invest in different asset classes that exhibit different risk-return profile and have a relatively low correlation to each other as compared to investments within the same asset class.

Equity: The scheme will invest in a well-diversified portfolio of equity & equity related instruments. The fund manager while selecting stocks will focus on the fundamentals of the business, the quality of management, the financial strength of the company, market leadership, etc. The scheme will invest across sectors without any market cap or sectoral bias.

Debt: The Scheme will invest in a diversified range of debt and money market instruments. The fund manager will allocate the assets of the scheme taking into consideration the prevailing interest rate scenario, yield curve, yield spread, and the liquidity of the different instruments.

The portfolio duration and credit exposures will be based on a thorough research of the general macroeconomic condition, political and fiscal environment, inflationary expectations, & other economic considerations.

Under normal circumstances, the asset allocation will be as under:

Table 2: Asset Allocation of SBI Balanced Advantage Fund

Instruments Indicative Allocation (% of assets) Risk Profile
Minimum Maximum High/Medium/Low
Equity and Equity related instruments 0 100 High
Debt securities (including securitized debt) and money market instruments (including TRIPARTY REPO, Reverse Repo and equivalent) 0 100 Low to Medium
Units issued by REITs and InvITs 0 10 Medium to High

(Source: Scheme Information Document

Who will manage SBI Balanced Advantage Fund?

Mr Gaurav Mehta and Mr Dinesh Balachandran for equity, Mr Dinesh Ahuja for debt, and Mr Mohit Jain for overseas investments will be the dedicated fund managers for this scheme.

Mr Gaurav Mehta is Fund Manager at SBI Funds Management Pvt. Ltd. His qualification includes PGBM (IIM Lucknow), B.Tech (IIT Bombay), CFA Charter holder, CFA Institute, USA. Mr Mehta has over 13 years of experience in Indian financial markets. Prior to joining SBIFMPL, he worked with Ambit Investment Advisors as a Portfolio Manager, as an equity research analyst for Institutional equities at Ambit Capital; and had begun his career with Edelweiss Capital.

Mr Mehta also manages SBI Retirement Benefit FundSBI Long Term Advantage fund – Series VI and SBI Multi Asset Allocation Fund.

Mr Dinesh Balachandran is Fund Manager at SBI Funds Management Pvt. Ltd. His qualification includes B. Tech (IIT-B), M. S. (MIT, USA), and CFA Charter holder. Mr Dinesh has over 18 years of experience in the industry primarily as Research Analyst. Prior to this, he was associated with Fidelity Investments, USA as Research Associate. He also manages SBI Long Term Equity Fund and SBI Contra Fund.

Mr Dinesh Ahuja is Fund Manager at SBI Funds Management Pvt. Ltd. His qualification includes B.Com and M.M.S. Mr Ahuja has over 22 years of experience in Indian financial services and capital markets in various capacities. Prior to join SBLFMPL, he was associated with L&T Investment Management Ltd. as Fund Manager, and with Reliance Asset Management Ltd., and Reliance General Insurance Co. Ltd.

Mr Ahuja currently manages SBI Magnum Income FundSBI Magnum Gilt Fund, SBI Dynamic Bond FundSBI Magnum Medium Duration FundSBI Magnum Constant Maturity FundSBI Equity Hybrid Fund (debt portion), SBI Magnum Children’s Benefit Fund – Investment Plan, and SBI ETF 10 year Gilt.

Mr Mohit Jain is Fund Manager and Credit Analyst at SBI Funds Management Pvt. Ltd. He is a CFA, holds B.E. (Engineering) degree, and has over 8 years of experience in the area of financial services. Prior to working with SBIFMPL, he was associated with Crisil Limited as Research Analyst.

He is the dedicated Fund Manager for managing overseas investments of the Schemes of SBI Mutual Fund, which have a mandate to invest in overseas securities.

Fund Outlook – SBI Balanced Advantage Fund

SBI Balanced Advantage Fund is a dynamic asset allocation fund that invests in equity and debt depending on the current market conditions to balance the risk and reward. It offers investors an opportunity to invest in equity markets with a balanced approach.

The scheme aims to capture the potential upside and limit the downside in volatile equity markets. It provides dynamic allocation on the basis of several parameters. The fund managers have complete flexibility to manoeuvre asset allocation in the range of 0-100% across asset classes depending on prevailing market and economic conditions.

Depending on the opportunity to generate higher alpha, fund managers will move between the asset classes without any restriction. The scheme aims to follow Three-tiered investment strategy that finds the right asset mix, determines the strategy tilt and selects the stocks accordingly.

Although the scheme will endeavour to provide risk-adjusted returns, the ability of the fund managers to allocate the efficiently between equity and debt, while maintaining a well-diversified portfolio will influence the performance of the fund. In addition, the selection of quality securities and their weightage will depend on the fund managers.

Thus, this makes it a risky investment proposition, suitable for investors with moderately high-risk appetite, and long investment horizon of at least 3 years. You need to ensure that your investment objective aligns with the fund.

This article first appeared on PersonalFN here

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