Many investors often go through a dilemma before investing, regarding which asset class to choose for optimal returns. Too many variables in the market make investing complicated, so confused investor behaviour leads to emotional decisions & sub optimal returns. Many investors fall prey to the greed during market highs, whereas panic when market crashes and eventually fail to rebalance their portfolio.
An adequate mix of assets such as equity and debt can assist your portfolio to survive across various market cycles. It becomes a daunting task for investors to allocate their funds to an optimal asset mix depending on the market conditions, notably Balanced Advantage fund comes to rescue in such situation.
Balanced Advantage Funds are ideal for investors as they do not have to monitor their asset allocation frequently. The fund manager dynamically manages the asset allocation and maintains the right asset mix in as per the prevailing market conditions. Hence, these funds are also known as dynamic asset allocation funds and are investor’s favourite during volatile and uncertain market conditions.
In a balanced advantage fund, an investor can gain when equity markets move up and limit the downside by increasing the allocation to debt securities, thus preventing investor’s portfolio from downside risk when the market drops. Investors have the chance to gain from both rising and falling market scenario by investing in balanced advantage funds.
Looking at the current uncertainty surrounding the market with the new Omicron variant of virus. Mahindra Manulife Mutual Fund has launched an open-ended dynamic asset allocation fund called Mahindra Manulife Balanced Advantage Yojana. It is a kind of scheme where the fund manager will actively manage and will have the flexibility to control the equity and debt exposure in the portfolio by following the set asset allocation model.
Table 1: Details of Mahindra Manulife Balanced Advantage Yojana
| Type | An open ended dynamic asset allocation fund | Category | Balanced Advantage Fund |
| Investment Objective | The investment objective of the Scheme is to provide capital appreciation and generate income through a dynamic mix of equity, debt and money market instruments. The Scheme seeks to reduce the volatility by diversifying the assets across equity, debt and money market instruments. However, there can be no assurance that the investment objective of the Scheme will be achieved. | ||
| Min. Investment | Rs 1,000/- and in multiples of Re 1/-thereafter with no upper limit. Additional Purchase Rs 1,000/- and in multiples of Re 1/-thereafter. | Face Value | Rs 10/- per unit |
| SIP/STP/SWP | Available | ||
| Plans |
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Options |
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| Entry Load | Not Applicable | Exit Load |
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| Fund Manager | – Mr Manish Lodha – Ms Fatema Pacha – Mr Rahul Pal |
Benchmark Index | Nifty 50 Hybrid Composite Debt 50: 50 Index TRI. |
| Issue Opens: | December 09, 2021 | Issue Closes: | December 23, 2021 |
(Source: Scheme Information Document)
The investment strategy for Mahindra Manulife Balanced Advantage Yojana will be as follows:
Mahindra Manulife Balanced Advantage Yojana will focus on seeking active asset allocation between equity and fixed income to manage the market risk. The scheme seeks to generate capital appreciation by investing in equity and equity related securities and generate income by investing in debt and money market instruments.
The scheme aims to dynamically manage the debt and equity allocations in the portfolio. The investment strategy would thus focus on a dual approach: a top down approach seeking an active asset allocation between equity and debt, and a bottom up process for the construction of portfolio specific securities.
The Growth, Management, Cash-flow and Valuation (GCMV) is an internal investment framework used for determining fair valuation of stocks which further helps in estimating valuation gaps (fair valuation vis a vis market price), if any. Opportunities are identified based on the identification of Catalysts that helps in bridging the valuation gaps by re-rating of the stocks.
Within equity allocation, the scheme will follow a top down approach to select sectors and follow a bottom up approach to pick stocks across the sectors based on the quality of business model and quality of management. Quality of business model and quality of management will be assessed by evaluating past track record and/or future outlook.
The fund house will follow this internal GCMV rule based approach to follow the dynamic asset allocation for the Scheme. The approach seeks to build equity and debt asset allocation decisions based on the prevailing market and economic conditions (including factors like equity valuations, momentum, interest rate movements, etc.).
Under normal circumstances, the asset allocation will be as under:
Table 2: Asset Allocation for Mahindra Manulife Balanced Advantage Yojana
| Instruments | Indicative Allocation (% of net assets) | Risk Profile | |
| Minimum | Maximum | High/Medium/Low | |
| Equity & Equity related instruments ^ | 0 | 100 | High |
| Debt and Money Market Securities (including TREPS (Tri-Party Repo), Reverse Repo) | 0 | 100 | Low to Medium |
^The scheme may invest in derivatives instruments to the extent of 50% of the Net Assets of the Scheme.
(Source: Scheme Information Document)
The asset allocation decisions will be reviewed on an ongoing basis and would be linked to the movement in the market variables. The Fund Manager will deploy a combination of strategies to achieve the investment objective of the scheme.
The scheme may invest in various derivative instruments, which are permissible under the applicable regulations. Derivatives will be used for hedging, and portfolio balancing or such other purpose as may be permitted under the regulations and guidelines from time to time. Such investments shall be subject to the investment objective & strategy of the scheme, and the internal limits if any, as laid down from time to time.
Who will manage Mahindra Manulife Balanced Advantage Yojana?
Mr Manish Lodha, Ms Fatema Pacha and Mr Rahul Pal will be the dedicated fund managers for this scheme.
Mr Manish Lodha will be managing the equity portion of the portfolio. He is a CA, CS and B.com (H) graduate and has over 15 years of experience in financial services. Before joining Mahindra Manulife Investment Management Pvt. Ltd., he was associated as Asst. Fund Manager (Equity) with Canara HSBC OBC Life Insurance Co Ltd., and as Research Analyst (Equity) with Kotak Mahindra Mutual Fund.
At MMIMPL, Mr Lodha currently manages Mahindra Manulife ELSS Kar Bachat Yojana, Mahindra Manulife Multi Cap Badhat Yojana, Mahindra Manulife Mid Cap Unnati Yojana, Mahindra Manulife Top 250 Nivesh Yojana, Mahindra Manulife Flexi Cap Yojana, Equity portion of Mahindra Manulife Arbitrage Yojana, Mahindra Manulife Equity Savings Dhan Sanchay Yojana and Mahindra Manulife Hybrid Equity Nivesh Yojana.
Ms. Fatema Pacha will be managing the equity portion of the portfolio. Her qualifications are PGDM (Finance), BE (Computers) and has over 14 years of experience in financial services industry. Prior Mahindra Manulife Investment Management Pvt. Ltd., she has worked with ICICI Prudential Life Insurance as Fund Manager (Equity), and UTI Mutual Fund as Research Analyst (Equity).
At MMIMPL, Ms. Pacha currently manages Mahindra Manulife Rural Bharat and Consumption Yojana, Mahindra Manulife ELSS Kar Bachat Yojana, Mahindra Manulife Multi Cap Badhat Yojana, Mahindra Manulife Large Cap Pragati Yojana, Mahindra Manulife Focused Equity Yojana, Mahindra Manulife Flexi Cap Yojana, Equity portion of Mahindra Manulife Equity Savings Dhan Sanchay Yojana and Mahindra Manulife Hybrid Equity Nivesh Yojana.
Mr Rahul Pal will be managing the debt portion of the portfolio. He holds B.com (Hons) and ACA degree and has over 16 years of experience in fund management. Before Mahindra Manulife Investment Management Pvt. Ltd., he has worked as Head Fixed Income, Taurus Asset Management Co. Ltd., and Fund Manager – Fixed Income at Sundaram Asset Management Co. Ltd.
At MMIMPL, Mr Pal currently manages Mahindra Manulife Low Duration Fund, Mahindra Manulife Dynamic Bond Yojana, Mahindra Manulife Short Term Fund, Mahindra Manulife Liquid Fund, Mahindra Manulife Ultra Short Term Fund, Mahindra Manulife Overnight Fund, Debt portion of Mahindra Manulife Arbitrage Yojana and Mahindra Manulife Hybrid Equity Nivesh Yojana.
Fund Outlook – Mahindra Manulife Balanced Advantage Yojana
Mahindra Manulife Balanced Advantage Yojana aims to follow the dynamic asset allocation strategy using the multi variate approach. An internal investment approach couples qualitative and quantitative assessment of macroeconomic, market and technical indicators, valuations, growth outlook, interest rates, liquidity, etc.
The scheme provides dynamic asset allocation and capture the optimum mix between Equity and Debt across market cycles. With flexibility to invest up to 100% each in equity & debt, the scheme may be suitable for volatile market conditions.
Due to the recent emergence of the ‘Omicron’ (a new variant of the coronavirus) classified as a ‘variant of concern’ and ‘high-risk’ by the WHO, the market may witness intensified volatility. If restrictions and localised lockdowns are once again imposed by the government, it could potentially pull down the economic growth and earnings. For now, the clear direction for the equity market from the current elevated levels is unknown.
Being a balanced advantage fund, the scheme will limit the downside and optimise the potential upside in a volatile market. However, do note that this scheme will allocate a major part of its assets to equity as well as debt securities. While the allocation to equities are risky in nature and may tend to lose money in an extreme market condition, the allocation to debt securities are prone to credit risk, interest rate risk, etc. which may have impact on portfolio valuation. This makes Mahindra Manulife Balanced Advantage Yojana a bit risky investment proposition.
Thus, Mahindra Manulife Balanced Advantage Yojana is suitable for investors who can stomach moderately high risk and have a long investment horizon of at least 5 years. Before considering investment in the scheme, you should ensure that your investment objective aligns with the fund.
This article first appeared on PersonalFN here
