Balanced Advantage Funds surge as Nifty approaches Life-time high: Tata Asset Management
September 2024: According to data from the Association of Mutual Funds in India (AMFI), hybrid schemes saw a significant surge in July 2024, with net inflows reaching INR 17,436 crore—a remarkable 97% month-on-month increase, driven largely by balanced advantage funds. The mutual fund industry recorded a sharp rise in net inflows within the balanced advantage fund category, totalling INR 1,798 crore, nearly three times the net inflows of June 2024 (INR 644 crore).
With the Nifty seems to be steadily approaching the 25,000-plus mark, the Balanced Advantage Fund (BAF) category has attracted increased interest from investors prioritizing capital preservation over high returns, given concerns that the valuation of the bellwether index may be somewhat stretched.
Balanced Advantage Funds are taxed as per equity funds, but they carry comparatively less risk than pure equity funds given the dynamic asset allocation strategy. These funds strike a balance between risk and return as they allocate investments across both stocks and bonds. While the traditional hybrid funds maintain a fixed asset allocation irrespective of market movements, balanced advantage funds modify their equity and debt ratio in response to market conditions.
Thus they offer investors a higher potential for capital appreciation given their exposure to stocks, but they come with lower volatility and risk, as they modify their allocation when the market valuation seems expensive or certain macro-economic indicators indicate a correction in the offing.
This strategy helps stabilize the fund's value, offer long-term appreciation of capital in the long-term and minimizes fluctuations during market downturns.
"The balanced advantage funds have the potential to capture upside in rallies and also to protect capital loss during market corrections. Thus, the NAV of balanced advantage fund during the drawdown is reduced in market downturns due to hedging via shifting funds to debt," said Rahul Singh, CIO, Tata Asset Management.
"Balanced Advantage Funds work well for investors who seek moderate returns with low risk appetite," added Mr Singh.
The Tata Balanced Advantage Fund received INR 1,340 crore over the last four months (April to July
2024), with INR 542 crore coming in July 2024 alone higher than the average of the preceding three months. Currently, the fund's net equity allocation stands at around 46%. Tata Balanced Advantage Fund (BAF) has consistently experienced significantly lower drawdowns compared to the Nifty, thanks to its dynamic asset allocation strategy, which adjusts exposure between debt and equity in response to market conditions.
Since its inception, Tata Balanced Advantage Fund has delivered a return of 13.64%, and it has achieved a 21% return over the past year. The fund recently crossed an AUM of INR 10,000 crore on 31st July 2024.
Sources: Internal Data and AMFI (Latest available data for July 2024)
Disclaimer:
1) Scheme returns in terms of CAGR are provided for past 1 year, 3 years, 5 years and since inception.
2) Point-to-point returns on a standard investment of Rs. 10,000/- are in addition to CAGR for the schemes.
3) Different plans shall have a different expense structure. The performance details provided herein are of regular plan growth option except for TATA Equity Savings Fund where performance details given is for regular plan dividend option.
4) NA stands for schemes in existence for more than 1 year but less than 3 years or 5 years, or instances where benchmark data for corresponding period not available.
5) Period for which schemes performance has been provided is computed basis last day of the month - ended preceding the date of advertisement.
6) For Benchmark Indices Calculations , Total Return Index (TRI) has been used. Where ever TRI not available Composite CAGR has been disclosed. Please refer Disclaimer sheet for composite CAGR disclosure.
7) Past performance may or may not be sustained in future. For computation of since inception returns the allotment NAV has been taken as Rs. 10.00 (Except for Tata Treasury Advantage Fund where NAV is taken as Rs. 1,000). Schemes in existence for less than 6 months, performance details for the same are not provided.
8) Tata Treasury Advantage Fund has one segregated portfolio and the creation of Segregated Portfolio 1 in the scheme has impacted the NAV of the scheme to the extent of (-1.66% ) of NAV As per National Company Law Tribunal (NCLT) approved resolution plan on 7th June 2021, the segregated portfolio of the scheme (i.e Tata Treasury Advantage Fund-Segregated Portfolio) has received Rs. 32.00 Crores against gross receivable of Rs.78.85 Crores. The final repayment were in the form of upfront cash and secured 10 year 6.75% par bonds issued by Piramal Capital and Housing Finance Ltd. (PCHFL). The segregated portfolio of the scheme has received Rs. 14.54 Crores in Cash and total face value of Rs.17.46 crores of PCHFL bonds. The cash component was paid out to the investors immediately and the payout amount was credited to the investors bank account on October 12, 2021. The Bonds of Piramal Capital and Housing Finance Ltd (PCHFL) bonds were sold in the open market and the proceeds of Rs 15.00 crores were distributed to investors on February 14, 2022.
9) No. of schemes managed by the fund managers : Rahul Singh - 4, Sailesh Jain - 8 and Akhil Mittal - 5
10) Scheme in existence for more than six months but less than one year, simple annualized growth rate of the scheme for the past 6 months from the last day of month-end is provided.
