Axis MF enters Balanced Advantage Fund category by repositioning existing fund

Axis Dynamic Equity Fund now becomes Axis Balanced Advantage Fund, an open ended dynamic asset allocation scheme

Staff Writer   /   October 7, 2021

Axis Mutual Fund has renamed and repositioned its existing fund (Axis Dynamic Equity Fund) to Axis Balanced Advantage Fund. Axis Balanced Advantage Fund (Axis BAF) is an open ended dynamic asset allocation fund which manages exposure actively between Equity and Fixed income. Here are all the details.

Highlights of change

* Axis Balanced Advantage is an open ended dynamic asset allocation fund

* Axis Balanced Advantage seeks to achieve dual objective of capital appreciation and income generation

* The fund will actively allocate between Equity and Fixed income based on market valuation and trend

* Fund Benchmark: NIFTY 50 Hybrid Composite Debt 50:50 Index

* Repositioning effective date: October 1, 2021

What is Axis Balanced Advantage

The asset allocation of the fund is guided by an in-house proprietary methodology, which allows the AMC to manage equity exposure in response to changes in underlying market conditions.

This dynamic nature makes it an ideal investment solution for all investors as the fund not only manages to navigate market volatility better but also focuses on wealth creation over the long term. The repositioning becomes effective from 1st October 2021 and with this Axis AMC aims to become a prominent player in the Balanced Advantage Fund category.

Why dynamic asset allocation

The inherent volatile nature of equities can sometimes lead to abnormality in price action in the near term. This can influence investor behaviour and lead investors to buy at market peaks and sell at market lows, causing massive wealth destruction. This very destruction can be mitigated if investors can be presented with a product that has intelligent risk management built in its core.

Axis Balanced Advantage Fund is aimed at finding a solution for this basic problem for investors. Through its proprietary methodology, it aims to dynamically manages Equity and Fixed Income exposure and tries to achieve the basic tenets of investing (Buy low, Sell High).

The balanced advantage fund (BAF)/dynamic asset allocation funds (DAA) category was created after SEBI’s new categorisation rules. Rules say these funds need to invest in equity/debt that is managed dynamically within a wide range of 0-100 per cent. But to target equity fund taxation, these hybrid funds usually maintain 65 per cent equity exposure on an average.

Investment approach

After the revision, Axis Balanced Advantage Fund will have greater flexibility to invest in a particular asset class with the minimum range of 0% to maximum range of 100% in both Equity and Fixed Income. The scheme also has the provision to invest 0% to 10% in units issued by REITs & InvITs.

While the in-house methodology guides the fund manager to allocation between asset classes, the stock selection is a complete bottom up process based on the Fund Managers view. The stocks picked in Axis Balanced Advantage Fund continue to remain backed by Axis Mutual Fund’s philosophy of focus on quality and will carry on looking for stocks that are expected to report faster growth than the relative benchmark (this includes sustainable earnings growth potential, credible management and acceptable liquidity), considering current times.

As such, the main differentiating factor among the two dozen funds in the versatile dyanmic asset allocation/balanced advantage category is their respective in-house model that guides how schemes switch between equity, equity-linked derivatives and debt. Since each fund differs in its call on equity market direction, this reflects on the risks and returns too. Hence, investors should develop a nuanced understanding of the category before deciding to use the BAF/DAA route to fine-tune their asset allocation needs.

Suitability

Axis Balanced Advantage Fund can be a part of an investors core allocation, irrespective of them being first timers or seasoned investors. The funds ability to manage asset allocation between equity and fixed income makes it an investment worthy for the long term.

Given their ability to adapt portfolios to various market scenarios, balanced advantage/dynamic asset allocation fund category (3-year downside capture ratio of 60 per cent) will not fall as much as hybrid aggressive fund category (downside capture ratio of over 100 per cent) . It is important for investors to look at consistency in BAF performance over various time periods before choosing one.

Fund-house speak

On this development, Chandresh Nigam, MD & CEO, Axis AMC said, “As investors, we all want to invest with the confidence that our investments will not fall prey to vagaries of market volatility. Balanced Advantage funds allow investors to mitigate equity risk through a structured process that manages equity exposure dynamically. We believe that Balanced Advantage funds will transform investing experience for investors and allow them to benefit from the long term growth potential of equity while managing its risk.”

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