Dynamic asset allocation plans offer shelter in turbulent times

Conservative investors looking for lower uncertainty in returns from equities could invest in dynamic asset allocation or balanced advantage schemes

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First-time investors or the more conservative ones looking for lower uncertainty in returns from equities could invest in dynamic asset allocation schemes or balanced advantage schemes. This product alters its equity allocation based on market valuations with many of them allocating only 40-60 per cent allocation to equities based on market valuations while the balance is in arbitrage and debt products. Despite a turbulent market, many of them have managed to return more than 9 per cent over the last one year, with low volatility. ET takes a look at the top four funds in the category.

DSP Dynamic Asset Allocation Fund
AUM: Rs 865 crore
Fund Manager: Atul Bhole, Saurabh Bhatia
Top 3 Holdings: Reliance Industries, HDFC Bank, Hindustan Unilever
1-Year Return: 10.85 per cent

A conservative fund, meant for investors with a low risk appetite, the equity allocation oscillates between 20 per cent and 90 per cent. The model uses a mix of fundamentals like average PE, PB ratio in conjunction with technical like 30 and 200 DMA to arrive at equity allocation. While picking stocks, the fund manager follows a multi cap approach and companies that form part of the portfolio are ones with strong business, management and growth. Stocks are primarily large cap-oriented with high liquidity. Debt portion is conservatively managed with high quality paper and no duration call.
  • 8.71%Annualized Return for 3 year
  • >3 years Suggested Investment Horizon
  • 5.4 YearsTime taken to double money
  • 8.5%Annualized Return for 3 year
  • >3 years Suggested Investment Horizon
  • N.ATime taken to double money

Kotak Balanced Advantage Fund
AUM: Rs 2,916 crore
Fund Manager: Abhishek Bisen, Arjun Khanna, Harish Krishnan
Top 3 Holdings: Reliance Inds, HDFC bank, ICICI bank
1-Year Return: 9.99 per cent

The fund uses a two factor model to determine equity allocation. While the primary factor is the trailing Nifty 50 P/E, it also couples it with trends / sentiment which include rolling return. Currently the fund has a 42.73 per cent allocation to equity. The debt portion is managed conservatively primarily invested in AAA rated PSUs and other corporates.

Motilal Oswal Dynamic Fund
AUM: Rs 1,264 crore
Fund Manager: Akash Singhania
Top 3 Holdings: HDFC, United Spirits, Bajaj Finance
1-Year Return: 9.71 per cent

In the scheme, the net equity exposure can vary between 30 per cent and 100 per cent with the current equity allocation at 45 per cent. The fund decides its net equity exposure using an amalgamation of of price/earnings, price/ book and dividend yield of Nifty 50 Index. The fund managers follows a multi cap strategy to pick stocks with the debt portfolio consisting of high quality bonds.

ICICI Prudential Balanced Advantage Fund
AUM: Rs 27,469 crore
Fund Manager: Dharmesh Kakkad, Ihab Dalwai, Manish Banthia, Rajat Chandak and S Naren
Top 3 Holdings: HDFC, HDFC Bank, Infosys
1-Year Return: 9.29 per cent

The largest fund by assets under management in this category, many financial planners recommend this to first-time investors or conservative investors. The fund adjusts its equity allocation based on the price-to-book-value ratio of the market. Equity allocation can range between 30 per cent and 80 per cent. The current equity allocation is at 55 per cent, with allocation averaging 45 per cent over the last one year. The equity portion is mainly invested in large cap stocks while in the debt portfolio, the fund manager could take some duration calls which helps make most of rate declines.
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