NFO review: LIC MF Balanced Advantage Fund

This is an open-ended dynamic asset allocation scheme and the NFO closes November 3, 2021

Staff Writer   /   October 14, 2021

LIC Mutual Fund will launch the new fund offer of LIC MF Balanced Advantage Fund. The NFO period opens on October 20 and will close on November 3, 2021. This is among the last fund-houses in the current crop to launch a balanced advantage fund product, called BAF in MF industry parlance. 

Scheme objective

The investment objective of the scheme is to provide capital appreciation/ income to the investor from a dynamic mix of equity, debt and money market instruments. The scheme seeks to reduce the volatility by diversifying the assets across equity, debt and money market instruments. However, there is no assurance or guarantee that the investment objective of the Scheme will be realized.

Why invest

LIC MF Balanced Advantage Fund may reduce the impact of losses in adverse market conditions on predefined parameters. Allocation through Fundamental Based Mathematical Model (FMM) will give an edge over plain vanilla equity funds. 

The fund endeavours to keep its gross equity exposure greater than or equal to 65% to enable investors to avail equity taxation benefit. Plus, the fund aims to generate near equity returns with lower volatility.

Deciding asset allocation

The fund will input various parameters such as interest rate, future earnings yield and price to earnings ratio in its model. The model output is the net equity exposure, basis on which the fund will calculate the mix between net equity exposure, arbitrage and debt. 

Stock / security selection will be based on internal research and investment framework. The portfolio is constructed keeping in mind the investment objective of the fund. 

Rebalancing the asset allocation based on the model output. The fund manager looks into various aspects of business environments including valuations and other parameters while rebalancing the portfolio with an objective of optimizing the returns. 

Who should invest

LIC MF BAF is ideal for iInvestors looking for long term wealth creation, looking for diversification of investments, looking for products with lower volatility than the pure equity product and who are uncomfortable buying stocks at extremely high valuations.

While many think they can do asset allocation themselves, practical experience shows that would be very tough. It is important to stick to a model based asset allocation, dynamic approach towards equities, and enjoy the experience of years of managing debt & equity.

NFO details

Fund manager – Yogesh Patil and Rahul Singh

Benchmark – LIC MF Hybrid Composite 50 – 50 index

Special facility – SIP and switch

Minimum application amount – Rs 5,000

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