The equity market is reeling under pressure since the US Federal Reserve signaled that it would raise policy rates and end bond purchases in March. Investors can expect the volatility in the equity market to continue in the near future as well, due to various headwinds in play.
In the current market environment, those investors looking for capital appreciation at a risk lower than pure equity funds can consider investing in a worthy Multi-Asset Fund. It is a convenient option for investors who find it difficult to rebalance their portfolio on their own depending on the changing market conditions.
Multi-Asset Funds aim to generate modest capital appreciation while strategically reducing the overall risk from a combined portfolio of assets with low-correlation (usually equity, debt, and gold). The low correlation among assets enables Multi-Asset Funds to protect the downside risk during uncertain economic conditions and volatile markets and generate better risk-adjusted returns.
Axis Triple Advantage Fund is one such Multi-Asset Fund that has stood strong during bearish phases and has rewarded its long-term investors with superior risk-adjusted returns.
Graph 1: Growth of Rs 10,000 if invested in Axis Triple Advantage Fund 5 years ago
Data as on January 25, 2022
(Source: ACE MF)
Axis Triple Advantage Fund is a Multi-Asset Allocation Fund that aims to provide superior risk-adjusted returns to its investors through diversification across various asset classes viz. equity, debt, and gold that, historically, have a low correlation with each other. The fund has the mandate to invest in all the three asset classes and hold minimum 10% of its assets in each of them. Axis Triple Advantage Fund usually maintains an equity-oriented portfolio wherein it invests around 65%-80% of its assets, while the balance is invested in debt and gold. The fund follows a regular portfolio rebalancing approach within each asset class to offer investors the benefit of “buying-low and selling-high”. Following this strategy, Axis Triple Advantage Fund has effectively managed to limit downside risk during bearish market phases. Moreover, the fund has done well in the current bull phase. Over the past 5 years, Axis Triple Advantage Fund has rewarded investors with a CAGR of around 14.8%, as against 13.6% CAGR delivered by the CRISIL Hybrid 35+65 Aggressive index, thus generating a decent alpha of about one percentage point.
Table: Axis Triple Advantage Fund’s performance vis-a-vis category peers
|Axis Triple Advantage Fund
|ICICI Pru Multi-Asset Fund
|HDFC Multi-Asset Fund
|Navi 3 in 1 Fund
|UTI Multi Asset Fund
|CRISIL Hybrid 35+65 – Aggressive Index
Returns are point to point and in %, calculated using Direct Plan – Growth Option. Those depicted over 1-Yr are compounded annualised.
Data as on January 25, 2022
(Source: ACE MF)
*Please note, this table only represents the best performing funds based solely on past returns and is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. Past performance is not an indicator for future returns. The percentage returns shown are only for indicative purposes.
Axis Triple Advantage Fund has stood among the top performers in the Multi-Asset Fund category across various time frames in the past. In the last 2-year and 3-year periods, Axis Triple Advantage Fund has outperformed the category average by a noticeable margin of 2-4 percentage points. Even over the longer 5-year and 7-year periods, Axis Triple Advantage Fund has maintained a decent lead over most of its peers. It has also fared better compared to the CRISIL Hybrid 35+65 Aggressive index.
On the risk-return parameters, Axis Triple Advantage Fund has encountered volatility of 15.45% which is nearly in line with the category average of 15.96%, though slightly higher than the hybrid index (14.46%). The fund’s superior outperformance in the last few years has helped it rank higher on the risk-reward front. Its Sharpe of 0.28 is currently the highest in the multi-asset funds category, thus rewarding investors with superior risk-adjusted returns.
Investment strategy of Axis Triple Advantage Fund
Classified as a Multi-Asset Allocation Fund, Axis Triple Advantage Fund seeks to invest in a diversified portfolio of equity and equity-related instruments, fixed income instruments, and Gold ETFs. The fund usually invests 65%-80% of its assets in equities, 10%-30% allocation in debt and money market instruments, along with 10%-30% exposure in Gold ETFs.
The equity allocation in the portfolio is actively managed with the flexibility to invest across market caps. The fund follows the bottom-up stock selection process, focusing on the appreciation potential of individual stocks from a fundamental perspective. The universe of stocks in Axis Triple Advantage Fund is carefully selected to include companies having robust business models and enjoying sustainable competitive advantages as compared to their competitors, and that are available at a fair valuation.
For its fixed-income portfolio, Axis Triple Advantage Fund aims to invest in a diversified portfolio of high-quality debt and money market instruments. The fund manager invests in fixed income instruments taking into consideration the prevailing interest rate scenario & the liquidity of the different instruments.
It also invests in gold ETFs, as historically gold has shown to have a low correlation with other asset classes like equity and debt, making it a good asset for diversifying the overall portfolio.
Graph 2: Top portfolio holdings in Axis Triple Advantage Fund
Holding in (%) as of December 31, 2021
(Source: ACE MF)
As of December 31, 2021, Axis Triple Advantage Fund held 74.9% of its assets in equities with a predominant exposure to large-cap stocks. It held 42 stocks in its portfolio. The top-10 stocks accounted for around 41% of its assets, of which 5 belong to the Banking & Finance sector. Infosys topped the list with an exposure of around 5.9%, followed by TCS, ICICI Bank, Bajaj Finance, and Avenue Supermarts, having an allocation of around 4% to 5.5% each. Most of these stocks have been part of the fund’s top holdings for over two years now.
In the last one year, Axis Triple Advantage Fund has gained immensely from its holding in Bajaj Finserv, Infosys, Avenue Supermarts, Bajaj Finance, ICICI Bank, TCS, Gland Pharma, among others.
In terms of sector holdings, Axis Triple Advantage Fund’s portfolio is skewed towards Banking & Finance stocks where it has allocated 24.2% of its assets, followed by Infotech with an allocation of 12.5%. The other core sectors in the fund’s portfolio include Retail, Engineering, Pharma, and Auto Ancillaries having allocation in the range of 4%-7%. Though Axis Triple Advantage Fund’s portfolio is skewed towards cyclical, it has a significant diversification towards defensives and sensitive sectors.
Axis Triple Advantage Fund held 7.6% of its assets in debt instruments, which include allocation of 4.5% in moderate to high rated Corporate debt, and 3.1% in government securities. The average maturity profile of the debt portfolio has been in the range of 2-7 years in the last one year exposing the portfolio to slightly higher interest rate risk. The fund held an allocation of 10.5% in gold in the form of Gold ETF for diversification to gold as an asset class.
Axis Triple Advantage Fund holds a well-diversified portfolio invested across asset classes viz. equity, debt, and gold, as well as securities within those asset classes. Such diversification helps the fund stabilise its performance and do well in different market conditions, especially during volatile and uncertain phases.
From its performance data, Axis Triple Advantage Fund has delivered promising returns across various time frames and has turned out to be a rewarding proposition for long-term investors having a moderate risk appetite. Even though the fund has trailed the category average particularly during bull market phases, it has done well during bear market phases and rewarded investors over complete market cycles. Moreover, the fund has managed to achieve this at a reasonable level of risk compared to its peers, thereby generating superior risk-adjusted returns.
Axis Triple Advantage Fund is suitable for investors with moderate risk profile looking for capital appreciation through diversification across asset classes.
Note: This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.
This article first appeared on PersonalFN here