WhiteOak Capital MF launches Multi-Asset Allocation Fund. Should you invest?

The NFO of WhiteOak Capital Multi Asset Allocation Fund opened on May 3 and will close on May 10.

WhiteOak Capital Mutual Fund has launched New Fund Offering (NFO), an open-ended Multi Asset Allocation scheme that will invest in equities, debt and gold or silver instruments.

Multi Asset Allocation Funds invest in at least three asset classes with a minimum allocation of at least 10 percent to each asset class.

The NFO of WhiteOak Capital Multi Asset Allocation Fund opened on May 3 and will close on May 10.

What’s on offer?

The main rationale behind the scheme is that different asset classes tend to perform differently depending on economic cycles, global scenarios, and geo-political events.

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For example, in a low-interest rate, ample liquidity regime, though accrual of income on fixed income holdings is low, the equities tend to do well, other things remaining the same.

Accordingly, the scheme will invest in various asset classes such as equity, debt, gold, foreign equities dynamically, using an Internal Proprietary Model to figure out the relative attractiveness of these asset classes.

Returns on the scheme will attract a Long-term capital gains (LTCG) Tax with indexation benefits after the holding period of more than three years.

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The scheme’s asset allocaction, under normal circumstances would be 15-45 percent towards domestic equities, 10-55 percent towards fixed income, 10-40 percent towards gold and 0-10 percent towards foreign equities.

Domestic equities portion will include arbitrage positions to maintain more than 35 percent gross equity, which will help in favourable taxation.

The fund may also look to invest in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) upto 10 percent of net assets.

The scheme will be benchmarked against the S&P BSE 500 Total Return Index (40 percent), Crisil Composite Bond Index (40 percent), domestic price of gold (10 percent) and domestic prices of silver (10 percent).

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Aashish Somaiyaa, Chief Executive Officer of WhiteOak Capital Mutual Fund, said: “We are launching our Multi Asset Allocation Fund which aims to generate superior risk-adjusted returns for conservative investors who appreciate the nuances and benefits of dynamic asset allocation.”

“Our fund managers will perform not only security selection but also multi-asset portfolio construction in creating a portfolio to achieve reasonable returns with moderate volatility over the long term,” he added.

The scheme would be managed by Ramesh Mantri (equity), Piyush Baranwal (debt), Vineet Narang (gold/silver) and Shariq Merchant (overseas investments).

What works?

WhiteOak Capital Multi Asset Allocation Fund has all the elements of diversification, which includes, silver, international equities and REITs/ InvITs.

Many multi-asset allocation funds currently available in the market don’t offer exposure to silver and international equities, which is an additional advantage of this scheme.

Investments in multi-asset schemes are tax-efficient, compared to an arrangement wherein the investor chooses to invest separately in equities, debt and gold schemes and rebalance them from time to time.

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Rebalancing done by multi-asset allocation funds does not attract any tax. The tax liability arises only when the investor redeems the units.

“From an overall perspective, the scheme is trying to cover all the asset class, plus their sub-asset classes, which may work for the scheme. However, it is yet to be seen how they will create the actual portfolio with these assets,” Harshad Chetanwala, co-founder, MyWealthGrowth.com.

What doesn’t work?

There are around 27 schemes already available in the market under the hybrid multi-asset allocation category. Data from Value Research shows the performance of such funds can vary hugely.

For example, Quant Multi Asset Fund has delivered an annualized return of 38.73 percent on a three-year basis, while Quantum Multi Asset Fund of Funds has returned 10.40 percent during the same period. Therefore, choosing the correct fund is key.

On a three-year period, the category average return is around 17.42 percent.

On the overall multi-asset allocation category, Rushabh Desai, Founder, Rupee With Rushabh Investment Services, said, “When you have three or more asset classes, it brings in all the risks of different asset classes into one product. So, this category is not a great product from risk mitigation point of view.”

What should investors do?

Experts say investors would be better off looking at existing multi asset allocation schemes in the market with a proven track record before considering a new scheme.

Desai suggests that investors would be better off keeping their investments in different asset classes separately.

“Currently I am only recommending dynamic asset allocation funds from the hybrid stable, where the allocation is done dynamically, mainly because of the risk mitigation point of view,” said Desai.