In a recent announcement, Nippon India Mutual Fund revealed changes to its Nippon India Multi-Asset Fund. This popular fund, catering to investors seeking diversification and long-term capital growth, will undergo a shift in its fundamental attributes.

This article delves into the details of these changes, analyses their potential impact on investors, and offers guidance on navigating this update.

Nippon India Mutual Fund, in a recent Notice-cum-Addendum No.21 dated June 14, 2024, Friday announced that…

“In accordance with the provisions of Regulation 18(15A) and Regulation 25 (26) of SEBI (Mutual Funds) Regulations, 1996 and in terms of the enabling provisions of the SID of Nippon India Multi Asset Fund (‘The Scheme’), the Board of Directors of Nippon Life India Trustee Limited (‘NLITL’) and Nippon Life India Asset Management Limited (‘NAM India’) have approved certain changes in Nippon India Multi Asset Fund.“

Nippon India Mutual Fund is a prominent player in the Indian mutual fund industry. Established in June 1995, it was initially known as Reliance Mutual Fund. Following a change in ownership, it was renamed Nippon India Mutual Fund in September 2019. As of March 31, 2024, AUM is reported to be around Rs 4,31,332.32 crore.

[Read: Why Investing in Multi-Asset Allocation Funds Makes Sense Now]

Understanding the Nippon India Multi-Asset Fund

At present, the Nippon India Multi-Asset Fund aims for long-term capital growth by investing in a diversified mix of assets. This included equity and equity-linked instruments, debt instruments, exchange-traded commodity derivatives (ETFs) for gold, and a minimum allocation of 15% to domestic gold prices.

The fund serves as a one-stop solution for investors seeking exposure to various asset classes without actively managing individual investments. Post the changes, the scheme will be an open-ended scheme investing in equity, debt, exchange-traded commodity derivatives, and Gold ETF & Silver ETFs.

The Incoming Changes: A Multi-Asset Allocation Approach

The key changes Nippon India Mutual Fund will make to the scheme are listed below:

1. Fund Name Change: The scheme name will be altered from ‘Nippon India Multi-Asset Fund’ to ‘Nippon India Multi-Asset Allocation Fund’. This revised name reflects a shift towards a more actively managed multi-asset allocation approach.
2. Inclusion of Silver ETF: The fund will now invest in Silver ETFs alongside the existing Gold ETFs. This expands the range of precious metal exposure, potentially offering diversification benefits.
3. Investment Flexibility: The fund manager will have more flexibility in allocating assets across equity, debt, and commodities. This allows for potential adjustments based on market conditions and risk-return considerations.
4. Potential Changes in Benchmark: While the current information doesn’t specify a new benchmark, the shift to a multi-asset allocation strategy might involve a different benchmark compared to the previous one.

The changes are effective from July 14, 2024. The Nippon India mutual fund house mentioned that a detailed communication is being sent to all the existing unit holders of the scheme (i.e. whose names appear in the register of unit holders as on close of business hours on Wednesday, June 12, 2024), informing about the proposed changes.

In addition, the fund house is offering an exit window to the unitholders of 30 days from Monday, June 24, 2024, to Tuesday, July 23, 2024 (both days inclusive) to redeem their units without penalty.

• During the Exit Option Period, unitholders who do not agree to the change may choose to redeem their assets at the applicable Net Asset Value (NAV) without paying an exit load, subject to the conditions of the applicable cut-off period as specified in the applicable scheme’s SID.
• Any transaction requests received on or after Wednesday, July 24, 2024 (the ‘Effective date’) shall be subject to any exit loads that may be necessary in relation to the previously specified scheme.
• Unit holders who have pledged/encumbered their units will not have the option to exit unless they submit a release letter of their pledges/encumbrances before submitting their redemption/switch requests.
• Investors who have registered for a Systematic Investment Plan (SIP) in the aforesaid scheme and do not wish to continue their future investments must apply to cancel their SIP registrations.
• Unit holders who do not opt for redemption on or before Tuesday, July 23, 2024 (up to 3.00 p.m.) shall be deemed to have consented to the changes specified herein above and shall continue to hold units in the aforesaid scheme of Nippon India Mutual Fund.

In case, the unit holder has not received the communication, the investor can contact the fund house’s customer care/investor service centres or visit their official website.

This addendum, dated June 14, 2024, forms an integral part of the SID and KIM of the Scheme from time to time. All the other terms and conditions of the SID and KIM, read with the addenda issued from time to time, will remain unchanged.

Nippon India Multi-Asset Allocation Fund aims to achieve the investment objective by investing in equity and equity-related instruments, debt and money market instruments, Gold ETF and Silver ETF and Exchange Traded Commodity Derivatives (ETCDs) as permitted by SEBI from time to time.

The scheme seeks to provide diversification across equity, debt, and commodity asset classes to provide superior risk-adjusted returns.

The Potential Impact on Investors…

These changes will undoubtedly impact existing and potential investors in the scheme. The inclusion of Silver ETFs offers diversification benefits by adding another asset class. However, the impact on overall portfolio diversification depends on the allocation weight given to Silver.

The increased flexibility in asset allocation could potentially lead to a slightly higher risk profile. The fund manager’s ability to adjust allocations based on market conditions may introduce some volatility compared to the previous fixed allocation strategy.

Investors who chose the Nippon India Multi-Asset Fund for its specific asset allocation and focus on gold might need to re-evaluate if their investment goals still align with the revised strategy. The shift towards a more actively managed approach introduces an element of dependence on the fund manager’s skill and decisions. Investors who prefer a more passive investment style might require further consideration.

What Should the Existing Investors of Nippon India Multi-Asset Fund Do?

Here are some steps investors can take to navigate the changes in the Nippon India Multi-Asset Allocation Fund:

• Review Investment Objectives: Reassess your initial investment goals and risk tolerance. Does the revised strategy still align with your financial needs?
• Analyse the Revised Fund Strategy: Thoroughly understand the changes and how they might affect the fund’s risk-return profile. Research the potential impact of Silver inclusion and the fund manager’s investment philosophy.
• Compare with Peers: Explore other multi-asset allocation funds or balanced advantage funds that might better suit your current investment goals and risk tolerance. Consider qualitative and quantitative factors like expense ratios and past performance (remembering past performance doesn’t guarantee future results).
• Investment Horizon: Investors with a longer time horizon (ideally 5+ years) could be comfortable with the potential for slightly higher volatility associated with a new, more actively managed approach to the scheme.
• Seek Professional Advice: Consult with a SEBI-registered financial advisor to discuss your circumstances and receive personalised guidance on whether to continue investing in the Nippon India Multi-Asset Allocation Fund or explore alternative options.

Also, Keep yourself updated on the fund’s performance and the fund manager’s investment decisions after the changes are implemented.

To Summarise…

The upcoming changes to the existing Nippon India Multi-Asset Fund present both opportunities and challenges for investors. By carefully considering your investment goals, risk tolerance, and existing portfolio allocation, you can make informed decisions about whether the revised fund remains suitable for you.

Remember, a diversified multi-asset approach can be a valuable tool for achieving your long-term financial objectives. However, continuous monitoring, rebalancing, and seeking professional guidance when needed can help you navigate the evolving investment landscape and make adjustments as necessary.

Disclaimer: PersonalFN does not receive any monetary compensation from the fund house or scheme names stated in the article.

This article first appeared on PersonalFN here