Apr 17, 2013, 09.52 PM | Source: CNBC-TV18
In an interview to CNBC-TV18, personal finance expert, Feroze Azeez of Anand Rathi Private Wealth Management discussed various features of multi-asset funds.
Feroze Azeez (more)
Deputy CEO, AnandRathi Private Wealth Management | Capital Expertise: Mutual Funds
Below is the verbatim transcript of Azeez's interview with CNBC-TV18.
Q: Multi-asset funds might have been working wonders given the way gold etc. had been rallying, but now with commodities as a basket coming under pressure and equities not really performing, do they still hold relevance? Give us an idea? You need to explain to us how multi-asset funds function in terms of percentage asset allocation and their relevance going forward?
A: As of now these multi-asset funds are actually funds, which distribute asset across different asset classes. When things are very difficult for an investor to choose these kinds of funds in uncertain times become more relevant, for the fact that they decide the fund manager and leave the allocation to the expert.
There are two prominent kinds of asset class oriented funds, the multi-asset funds and one of them which mix gold, equity and debt. The gold, equity and debt funds, if they are dynamically managed, the gold portion and the equity portion predominantly have a significant hedge over each other, so they bring down the risks considerably, still retaining the expected return high and these funds from systematic investment plan (SIP) perspective for a retail investor make a perfect sense for the fact that the rupee cost averaging gets amplified.
Therefore, these work as three different assets put into one fund. So, it leaves fund managers discretion on the allocation, which seems very profitable in these uncertain times, so that's one point.
Also Read: Why investing in gold ETFs is a good option
The SIP mode amplifies the rupee cost averaging significantly because there is significant portion in the debt, due to high interest rates the accruals of those high interest rates actually takes care of the capital preservation over long-term periods, so one of those is the gold-linked monthly income plans (MIPs) or multi-assets.
There is a one more interesting category, which has emerged over the last year or year-and-a-half in the asset management space, which is called the Dual Advantage Funds. These Dual Advantage Funds mix debt and Call options, which are interesting for the fact that a retail investor gets maximum exposures to equity, still preserving his capital over three year periods. So, that's another thing, which has gained flavour and about 50-55 new fund offers (NFOs), which have come over the last year or year-and-a-half.