PPFAS Mutual Fund applies for dynamic asset allocation scheme with SEBI

The performance of the scheme will be benchmarked against CRISIL Hybrid 50+50 – Moderate Index.

Asset management company (AMC) PPFAS Mutual Fund has filed for an open-ended dynamic asset allocation scheme with the capital market regulator, the Securities and Exchange Board of India (SEBI).

Contrary to other fund houses, the 19th biggest AMC offers a limited number of schemes five at present -- Parag Parikh Arbitrage, Parag Parikh Conservative Hybrid, Parag Parikh ELSS Tax Saver, Parag Parikh Flexi Cap and Parag Parikh Liquid Fund.

The AMC had average assets under management (AUM) of Rs 45,608 crore for the September quarter.

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Dynamic Asset Allocation (DAA) or Balanced Advantage Fund (BAF) is one of the most popular categories in the Rs 50 trillion Indian mutual fund industry with the category’s total assets under management (AUM) at Rs 2.22 trillion as of November end with 29 schemes.

DAA/BAF invests in a mix of equities and debt securities, as they seek to find a ‘balance’ between growth and income by investing in both equity and debt.

These schemes invest in equity or debt that is managed dynamically (0 percent to 100 percent in equity and equity-related instruments; and 0-100 percent in debt instruments.

BAFs make sure an allocation of at least 65 percent to equities. This approach ensures that the capital gains booked by the investor on units of such schemes after holding them for one year and more, are taxed as long-term capital gains on equity funds and taxed at 10 percent if they exceed Rs 1 lakh.

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Parag Parikh Dynamic Asset Allocation Fund will invest in a combination of equity, debt and units issued by Real estate investment trusts (REITs) and infrastructure investment trusts (InvITs).

The performance of the scheme will be benchmarked against CRISIL Hybrid 50+50 – Moderate Index.

An exit load of 1 percent would be payable if units are redeemed or switched out within 1 year from the date of allotment of units. No Exit Load would be applicable, thereafter.

As per data available with Value Research, DAA/BAF schemes have delivered 19 percent returns on a one-year basis. On longer terms, these schemes have delivered 12 percent returns each on a three-year and five-year basis.

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Balanced advantage funds’ distinguishing feature is their ability to adjust the allocation between equity and debt based on market valuations and economic conditions.