Bandhan Mutual Fund (earlier generally known as IDFC Mutual Fund) has despatched out a discover to the unitholders of Bandhan Balanced Benefit Fund (BBAF) – itemizing out the change in the best way it’s going to resolve the fairness publicity of the scheme.

What’s altering?

BBAF is a dynamic asset allocation scheme that invests in a mixture of shares and bonds relying on the relative attractiveness of the asset class. The scheme manages belongings value Rs 2,402 crore as on July 30, 2023. Sachin Relekar and Sumit Agrawal handle the fairness element whereas Vishal Biraia manages the debt element.

As per the addendum dated July 5, 2023, the fund home has proposed to vary the best way it decides the extent of cash allotted to fairness. At current, a quantitative mannequin based mostly on weighted common price-to-earnings ratio (PE ratio) of Nifty 50 index is employed. For instance, if the ratio quotes under 12, then the fund managers will allocate 90-100% of the cash to equities, if the ratio stands between 12 and 16, then 75-90 p.c of the cash shall be invested in shares. The mannequin prescribes investing extra in fairness if the PE ratio is low and reduce the publicity to fairness if the ratio is excessive. If the PE ratio goes above 26 then solely 30-40 p.c of the cash in equities.

ALSO READ: RBI MPC: Das requires larger transparency in floating-rate loans

The fund home now proposes to switch this single issue quantitative mannequin by a multi-factor quantitative mannequin. The brand new quantitative mannequin shall be based mostly on valuations and mixture of basic in addition to technical parameters. Valuation parameter is a counter-cyclical indicator based mostly on Nifty 50 PE ratio, which signifies growing the fairness publicity when markets are cheaper and discount when costly. Elementary parameters embody macroeconomic components reminiscent of market returns adjusted for inflation, credit score spreads, and the motion of the Indian foreign money towards key currencies of developed and rising markets. Technical parameters embody a volatility index to gauge market volatility.

Why the change?

Many fund homes use multi-factor fashions to determine allocation to debt and fairness. Therefore this isn’t the primary time a fund home is choosing one.

ALSO READ: Samir Arora’s Helios Capital will get last SEBI nod for MF license; AMC to deal with energetic funds

“While present mannequin is straightforward to know, it wants different consideration components that are ideally impacting the market actions; these components could also be market volatility, danger urge for food within the monetary system, foreign money motion, and different basic components; incorporation of the identical will make the mannequin extra sturdy. Due to this fact, it’s proposed to undertake a number of factor-based fashions to find out fairness allocation, relying on alternatives accessible at varied instances based mostly on the valuation, basic and technical parameters,” stated Sirshendu Basu, Head-Product, Bandhan AMC.

What doesn’t change?

Barring the quantitative mannequin, the scheme options don’t change. The web fairness allocation although can go down as much as 30 p.c. However the scheme will proceed to take care of the typical gross fairness allocation at 65 p.c by taking arbitrage trades – whereby the fund supervisor concurrently buys shares in money market and sells similar amount in futures markets, capturing the value distinction. The scheme, therefore, is taken into account as an fairness fund for taxation objective. The identical set of fund managers proceed to handle the scheme.

ALSO READ: RBI’s fear on inflation can influence debt funds. Here’s what traders ought to do

Exit window

For the reason that proposal quantities to vary in basic attribute of the scheme, going by the regulatory pointers, the fund home has supplied the unitholders within the scheme a window of 1 month from July 13, 2023 to August 11, 2023. On this interval the unitholders who don’t agree with the change can promote their items with out paying exit load, if relevant. This exit window is elective and traders in congruence with the change, ought to proceed to remain invested.

Adblock check (Why?)