Even as frontline indices such as the Sensex and Nifty are nudging life-time highs, the broader market benchmarks have turned volatile. Specifically, mid- and small-cap indices have been correcting, due to valuation concerns and investor anxiety around mutual fund stress test results.

Bond markets have rallied smartly in recent months as the government’s fiscal consolidation path and the inflation trajectory have been positive.

Investors should ideally anchor their portfolio to a well-defined asset allocation pattern. By spreading investments across equity and debt (add gold, if necessary) based on their risk appetite, goal horizon etc, they would be in a position to earn reasonable risk-adjusted returns.

In this regard, Helios is coming out with a new balanced advantage fund (BAF) that will close on March 20. Read on to take an informed call on investing in the NFO.

The offer

Helios BAF has stated that gross equity and equity-related exposure would normally be maintained between 65 per cent and 100 per cent, and the net equity exposure shall be between 30 per cent and 80 per cent range. Various derivative strategies would be used for hedging against market headwinds. It endeavours to allocate greater than or equal to 65 per cent into equities, which will provide the scheme with equity fund taxation benefits. The fund seeks to use macroeconomics, market conditions, valuations and market sentiments for deciding the equity exposure.

The equity portfolio will eliminate any investment idea that does not meet its proprietary eight-factor model, which incorporates, among other aspects, accounting standards, valuations, sector or theme importance.

Helios BAF works with the idea that eliminating poor choices vastly improves the chances of generating better returns over the long term.

On the debt or fixed income part, the fund house has not stated a definitive strategy. It may, therefore, be difficult to gauge whether the fund would take, for example, accrual or bar-bell or duration strategies for its bond selection process.

Note for investors

The balanced advantage category is one of the largest in terms of asset size and also has many funds with very long track record.

HDFC Balanced Advantage and ICICI Prudential Balanced Advantage are large funds and have a strong long-term performance record over the past decade or so. They are suitable for investors across risk appetites as part of their asset allocation and in the process of de-risking of their portfolios. HDFC Balanced Advantage has given 17.7 per cent CAGR in the last 10 years, while ICICI Prudential Balanced Advantage has delivered 13.52 per cent over the same period. Both lump-sums and SIPs can be considered, as market entry becomes irrelevant in balanced funds since fund managers decide allocation based on multiple factors to reduce risk.

Tata Balanced Advantage and Baroda BNP Paribas Balanced have been around for more than five years, and have delivered well over this timeframe and can be considered by investors.

Helios is a relatively new fund house and is only a few months old. Given the limited track record of the fund house itself and the availability of other options in the category, investors can wait for the new Helios Balanced Advantage scheme to gain a track record before considering it for their portfolios.

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