PPFAS Mutual Fund, an asset management company (AMC), has recently submitted a proposal to the Securities and Exchange Board of India (SEBI) for an open-ended dynamic asset allocation scheme. Unlike many other fund houses, this 19th-ranked AMC currently offers a modest selection of five schemes: Parag Parikh Arbitrage, Parag Parikh Conservative Hybrid, Parag Parikh ELSS Tax Saver, Parag Parikh Flexi Cap, and Parag Parikh Liquid Fund.
As of the September quarter, the AMC managed an average assets under management (AUM) of Rs 45,608 crore. The proposed Dynamic Asset Allocation (DAA) or Balanced Advantage Fund (BAF) is a sought-after category in the Rs 50 trillion Indian mutual fund industry, boasting a total AUM of Rs 2.22 trillion as of November, spread across 29 schemes.
DAA/BAF funds strategically invest in a mix of equities and debt securities to strike a balance between growth and income. These funds dynamically manage their allocation, ranging from 0 percent to 100 percent in equity and equity-related instruments, and 0-100 percent in debt instruments. BAFs ensure a minimum of 65 percent allocation to equities, making any capital gains on units held for one year or more subject to a 10 percent tax if they exceed Rs 1 lakh.
The upcoming Parag Parikh Dynamic Asset Allocation Fund aims to diversify its investments across equity, debt, and units issued by Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). The scheme’s performance will be benchmarked against the CRISIL Hybrid 50+50 – Moderate Index.
Investors should note that an exit load of 1 percent applies if units are redeemed or switched out within one year from the date of unit allotment, with no exit load thereafter.
Data from Value Research indicates that DAA/BAF schemes have delivered impressive returns of 19 percent on a one-year basis. Over the longer term, these schemes have consistently provided returns of 12 percent each on a three-year and five-year basis. The distinctive feature of Balanced Advantage Funds lies in their ability to dynamically adjust allocation between equity and debt based on market valuations and economic conditions.