|
Fund |
ICICI
Balanced Advantage Fund |
|
Category |
Dynamic Asset
Allocation (Balanced) |
|
AUM (Rs Cr) |
30,900 cr (As
on 30/04/2021) |
|
Fund Manager |
Mr Sankaran
Naren Mr Rajat Chandak Mr Ihab
Dalwai Mr Dharmesh
Kakkad Mr Manish
Banthia Mrs Priyanka
Khandelwal |
|
Benchmark |
Crisil Hybrid
50 + 50 – Moderate Index |
What
is Icici Prudential Balanced Advantage Fund?
ICICI balanced advantage fund is a dynamic asset allocation
or balanced advantage fund.
It invests in both equity and debt but in varying and
flexible numbers.
It is the second largest fund it the balanced advantage fund
category after HDFC Balanced Advantage Fund.
It follows an in house model based on the price to book
value (P/BV) ratio.
It can move anywhere between 30-80% in equity.
For tax calculation purposes, it is considered an equity
fund.
What
is a balanced fund?
A dynamic asset allocation fund is more popularly known as a
balanced advantage fund.
A balanced advantage fund is a type of hybrid fund.
It invests in debt, equity and arbitrage positions although
the allocation is not fixed and can also sit on cash if the fund manager
desires so.
Unlike other hybrid funds like multi asset, aggressive and
conservative, a dynamic asset allocation or a balanced advantage fund does not have a
fixed mandate to follow.
The fund manager can move across different asset classes
based on the prevailing market conditions.
The importance of a balanced advantage fund is felt more during a
bearish market phase since it can cut down its equity portion and at the same
time make periodic equity purchases in the dip.
This is unlike other pure equity funds who at all times have
to maintain their mandate irrespective of the market situation.
ICICI
Balanced Advantage fund portfolio
As on 30th April 2021, the fund was overweight on
the following sectors:
- Automobile
- Energy
- Services
While it was underweight on the following sectors:
- Technology
- Financials
- FMCG &
- Healthcare
The fund has always been an actively managed and well
diversified fund which can be attested by the fact that as on 30th April
2021, it held 80 stocks.
This is true for most balanced advantage funds though since
they tend to be more diversified with both, sectors and stocks.
Its allocation to the various asset classes as on 30th
April 2021 is as under:
Equity – 38.50%
Debt – 26.70%
Cash - 34.80 %
The fund usually has a cyclical/value pick with respect to a
particular sector which should not be very surprising considering it can sit on
cash and wait for the opportune moment.
This again is a trend with most balanced advantage funds
which has both its pros as well as cons.
 |
| Top sectors as on 30/04/2021 |
ICICI
Balanced Advantage Fund Nav
As tempting as it is, comparing one balanced advantage with
another should be avoided at all costs.
This is because every balanced advantage will function in a
manner which could be very distinct.
Therefore, it does not make any sense to compare one fund to
another.
Some may sit on cash, some may not while some may have a
different approach towards the debt side.
Unlike equity funds, a balanced advantage fund has less
restrictions and more flexibility meaning every fund manager will manage it in
a manner that she feels fit.
With a balanced advantage fund, how it does in a bull market
is of less importance compared to how it performs in a bear market and that is
how its nav should also be judged.
If high returns is all you focus on then a balanced
advantage fund should not take your time and money.
Taxation
on ICICI Balanced Advantage Fund
For the purpose of taxation, ICICI Balanced advantage fund qualifies
as an equity fund and the taxation charges applicable on it are as follows:
LTCG
Long term capital gains tax better known as LTCG is applied
on any equity mutual fund when the gains from an equity mutual fund which is
held for more than a year is more than 1 lakh.
The LTCG rate is 10%.
Capital gains up to 1 lakh are exempt for taxes.
There is no indexation benefit when calculating LTCG.
STCG
Short term capital gains tax better known as STCG is applied
on gains from an equity mutual fund which is held for 12 months or less.
The STCG rate is 15%.
There is no ceiling benefit in STCG like the 1 lakh ceiling
in LTCG.
STCG is charged on from Re 1.
ICICI
Balanced Advantage fund & HDFC Balanced Advantage fund
HDFC Balanced advantage is the largest fund in this category
with ICICI pru balanced advantage being the second largest.
Both were recategorized in 2018 and that is where their
similarities end.
ICICI pru balanced advantage is more growth driven whereas
HDFC balanced advantage fund is more value driven.
One is more stable than the other whereas the other is more
volatile.
These two funds are prime examples of how every fund within
the balanced fund category can have a strategy of its own which is distinct
from the rest.
Which is precisely why as an investor you need to overlook
past returns in favour of understanding the underlying strategy when it comes
to a balanced advantage fund.
Additional reading: Click Here to read our complete review of HDFC Balanced Advantage Fund
Should
you invest in ICICI Balanced Advantage Fund?
ICICI Balanced Advantage can invest in both equity and debt,
the exposure to which can be dynamically managed based on the prevailing market conditions.
Such funds help in doing your job of rebalancing
which is necessitated by volatility which is a given with equity investing.
This should never be the only fund in your portfolio though
but should rather be a part of it.
Every balanced advantage fund will a strategy of its own and
that is usually based on valuation metrics like price to earnings (P/E), price
to book (P/B) and dividend yield.
This is not an exhaustive list but only the usual factors
are stated.
Such funds are slightly on the conservative side due to the
option of cutting down their equity exposure in a rising market.
This creates an illusion that they are safer since they can
up their allocation to debt which is not true since with debt you still need to
be on the look out for credit and interest rate risk.
Balanced advantage funds can be considered for your initial
steps into the world of equity investing but picking the one most suited for
you is where the real planning comes into the picture.
For portfolio enquiries, email us with your doubts at info@themutualfundguide.com
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