UTI Mutual Fund has launched UTI Balanced Advantage Fund, an open-ended dynamic asset allocation fund. The new fund offer (NFO) for this scheme opened on July 21, 2023 and will remain open till August 4, 2023.
This fund aims to offer investors a diversified portfolio of both equity and fixed-income investments.
The minimum investment during the NFO period will be Rs. 5,000 and in multiples of Re. 1 thereafter. The benchmark index for this fund is Nifty 50 Hybrid Composite Debt 50:50 Index.
Balanced Advantage Funds
Balanced advantage funds invest in a combination of equities and debt. This strategy allows investors to benefit from the growth in equity, while having the security of debt holdings during market downturns. These funds are well-suited for medium-term investment goals, and offer a blend of safety, income, and modest capital appreciation.
Sebi defines dynamic asset allocation or balanced advantage fund as those that allow flexible allocation between equity (nil to 100 per cent) and debt (nil to 100 per cent).
From the regulatory point of view, they are free to decide on their asset allocation and investment strategy. This technically means that these funds can take exposure to equity and debt from 0-100 per cent.
However, in order to take advantage of equity taxation, they need to have 65 per cent gross allocation in equity. This gives the fund manager the flexibility to invest in arbitrage and hedge portfolio through derivatives. This allows the fund manager to maintain 65 per cent equity allocation despite net equity allocation being much lower than 65 per cent.
The one-year average return for the balanced advantage category is 16.11 per cent, and for three years, it is 14.51 per cent. Out of the 25 funds listed on the Association of Mutual Funds in India (Amfi) website, 17 funds outperformed the category average of 16.11 per cent.
UTI Balanced Advantage Fund
The scheme aims to provide long-term capital appreciation and income by investing in a dynamically managed portfolio of equity and debt instruments. The fund house claims of a disciplined model-driven asset allocation solution that dynamically rebalances the portfolio in response to market conditions.
The stated asset allocation framework of the fund is to invest 30-90 per cent of the portfolio in net equity and 10-35 per cent in fixed income. However, it aims to maintain a minimum of 65 per cent of the total portfolio in domestic equity and equity-related instruments to avail equity taxation benefits. The portfolio of the scheme will be dynamically managed based on valuation and fundamental driven in-house proprietary asset allocation model. The model guided asset allocation based on valuations will eliminate the fund manager’s biases, UTI Mutual Fund said.
Vetri Subramaniam, CIO of UTI AMC said the fund’s portfolio rebalancing mechanism can help investors who find it challenging to navigate market volatility.
“For most investors who invest through mutual funds, the challenge is in handling the volatility. They all know the reasons why they should invest in equity and wish to participate in wealth creation through equities but don’t quite know how to handle the volatility that accompanies the journey. Investors need an asset allocation framework and a rebalancing mechanism,” he said.
