Many investors struggle to select the right asset allocation for their portfolios. The multi-asset allocation approach helps such investors to even out the risk that comes with investing in just one asset class. Allocating the right asset allocation mix to your portfolio can assist you in gaining optimal risk-adjusted returns.
The Multi-asset allocation strategy invests across various classes like equity, debt and gold. Since every asset class will perform differently in various market cycles, the losses one will incur from an equity investment due to high volatility will be balanced by the gold or debt portion of the portfolio. Considering the current market scenario, where equities might get volatile and interest rates may rise, thus making fixed-income investments challenging, a multi-asset approach could be a good option.
Baroda BNP Paribas Mutual Fund has launched Baroda BNP Paribas Multi-Asset Fund, it is an open-ended scheme investing in Equity, Debt and Gold ETF. A single portfolio that invests in multiple assets saves you from the operational hassles of investing in these assets individually and managing and tracking multiple portfolios. Thus, this fund allows you an exposure to multiple asset classes under a single fund and aims to earn better risk-adjusted returns across market cycles.
Commenting on the launch of this fund, Mr Suresh Soni, CEO at Baroda BNP Paribas Mutual Fund, said, “Baroda BNP Paribas Multi Asset Fund provides investors the opportunity to take exposure to an offering which is well-diversified across asset classes.”
Table 1: Details of Baroda BNP Paribas Multi-Asset Fund
|An open-ended scheme investing in Equity, Debt and Gold ETF.
|The investment objective of the scheme is to seek long-term capital growth by investing in equity and equity-related securities, debt & money market instruments, REITs / InVITs and Gold ETF. However, there can be no assurance that the investment objectives of the scheme will be realised.
|Rs 5,000/- and in multiples of Re 1 thereafter. Additional Rs 1,000/- and in multiples of Re 1 thereafter
|Rs 10/- per unit
|Mr Jitendra Sriram
Mr Vikram Pamnani
|65% of Nifty 500 TRI + 20% of NIFTY Composite Debt Index + 15% of INR Price of Gold
|November 28, 2022
|December 12, 2022
(Source: Scheme Information Document)
What will be the investment strategy for Baroda BNP Paribas Multi-Asset Fund?
Baroda BNP Paribas Multi-Asset Fund aims to follow a multi-cap investment approach. It invests in equity and equity-linked instruments across market capitalisation, viz., large-cap, mid-cap, and small companies.
The investment strategy endeavours to provide well-diversified allocation across asset classes such as equities, gold and fixed income (debt). The scheme will focus on creating an appropriately diversified portfolio of companies with a long-term perspective. 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 the business model and quality of management. The fund will hold around 45-55 stocks with diversified Allocation across sectors.
Stock-specific risk will be minimised by investing only in those companies that the fund management team has thoroughly analysed. The following are the broad parameters/factors that shall be considered while building the portfolio of companies:
- Business and economic fundamentals are driven by in-depth research
- The reputation of the management and track record
- Long-term growth prospects
- The financial strength of the companies, as indicated by well-recognised financial parameters employing strong stock selection valuation parameters.
How will the scheme allocate its assets?
The scheme seeks an allocation ranging for equities between 65-80%, fixed income and gold ETFs at 10-25%. The scheme may also invest in REITs and InVITs as another source of diversification of sources of potential capital appreciation and income generation.
Table 2: Asset Allocation for Baroda BNP Paribas Multi-Asset Fund
|Indicative Allocation (% of net assets)
|Equity and Equity Related Instruments
|Debt* & Money Market instruments
|Low to Medium
|Units issued by REITs & INvITs
(Source: Scheme Information Document)
Who will manage Baroda BNP Paribas Multi-Asset Fund?
Mr Jitendra Sriram and Mr Vikram Pamnani will be the designated fund managers for this scheme.
Mr Jitendra Sriram has completed his MBA in (Finance) and holds B.E. (Electrical & Electronics Engineering) degree. He has an overall experience of 25 years. Prior to joining Baroda BNP Paribas AMC, he was working with Prabhudas Lilladher Portfolio Management Services as Senior Vice President – Equity Fund Manager and with various companies viz., Max Life Insurance Company Private Limited, HSBC Securities & Capital Markets (India) Private Limited and HSBC Asset Management (India) Private Limited.
Mr Vikram Pamnani holds a PGDM (Finance) degree and has over 8 years of experience in the Fixed Income domain. Prior to joining Baroda BNP Paribas AMC, he was associated with Peerless Funds Management Company Limited, where he has spent over 3 years playing a key role in the Fund Management of Mutual Fund Schemes. Prior to this stint, he has worked as a Fixed Income trader at Canara Robeco Mutual Fund and was responsible for trading/execution of fixed-income assets across duration schemes and with Deutsche Bank as a Documentary Credit Analyst.
At Baroda BNP Paribas Mutual Fund, Mr Pamnani currently manages Baroda BNP Paribas Arbitrage Fund jointly with Neeraj Saxena, Baroda BNP Paribas Liquid Fund, Baroda BNP Paribas Overnight Fund, Baroda BNP Paribas Ultra Short Duration Fund, Baroda BNP Paribas Low Duration Fund, and Baroda BNP Paribas Money Market Fund jointly with Mayank Prakash.
Should you invest in Baroda BNP Paribas Multi-Asset Fund?
Baroda BNP Paribas Multi-Asset Fund scheme is a simple solution for tactical allocation to equity debt and gold – the three asset classes. When it comes to Fixed Income, the fund seeks to invest in a high-quality portfolio of debt & money market instruments to generate income with relatively low credit risks. The fund will seek exposure towards gold through investments in Gold ETFs.
The asset classes the fund invests in have a low correlation with each other. With this, the fund aims to create an all-weather portfolio that has the potential to perform across market cycles. The fund seeks to combine the power of equity, fixed income & gold ETF, which offers a differentiated asset allocation-based portfolio strategy that aims to offer growth during the upside and protect during the downside.
However, note that the scheme will invest a major portion in equities considered highly volatile in nature. The debt portion will attract interest rate risk, credit risk, and default risk. The persistent repercussions of the geopolitical tension, spiralling inflation and the fears of a possible recession in the US in 2023 may cause a significant risk to economic growth and continue the prevailing high market volatility. The margin of safety appears to be narrow, and the clear direction for the equity market from the current elevated levels is uncertain. Additionally, if there are adverse developments, such as a worsening of the geopolitical scenario and a massive increase in government borrowings, bond yields can go up further, investors should be prepared for some volatility in debt market in the near term. The interest rate risk amidst the dynamic market conditions is likely to have a bearing on the scheme’s performance.
Thus, the fortune of this fund will be closely linked to how investments in these three asset classes perform. This scheme is suitable for investors who can stomach the high risk and seek to invest in a well-diversified blend of asset classes under a single scheme. That said, it is necessary to have a long investment horizon of 5-7 years and ensure your investment objectives align with the fund.
This article first appeared on PersonalFN here