Smart Surfing In A Turbulent Market

Since the last 24 months, equity was rising and valuations remained costly. There was an inherent fear  among investors that markets might crash. The fund managers advised everyone to stay invested. So when the balanced funds started performing well, they witnessed a rise in price to earnings and price to book parameters. Balanced Advantage Funds (BAF) are dynamic asset allocation funds which switch between equity and debt based on quantitative parameters, thus containing the volatility. During that period, fund managers converted that money into debt. So if they were investing 85 per cent earlier to generate alpha in the equities, the new trend was to reduce the exposure by 10–15 per cent and manage it with 65 per cent in equity and 35 per cent in debt. This was a good strategy, since the interest rates were falling. When the interest rates fall, the price of the bonds go...