Fund |
Edelweiss
Balanced Advantage Fund |
Category |
Dynamic Asset
Allocation (Balanced) |
AUM (Rs Cr) |
4,754 cr (As
on 31/07/2021) |
Fund Manager |
Mr Bhavesh
Jain Mr Bharat
Lahoti Mr Gautam
Kaul |
Benchmark |
Crisil Hybrid
50 + 50 Moderate TRI |
What
is Edelweiss Balanced Advantage Fund?
Edelweiss balanced advantage fund is a dynamic asset
allocation or balanced fund.
It invests in both equity and debt but in varying and
flexible numbers.
It follows an in house model called Edelweiss Equity Health
Index (EEHI).
The EEHI model is a pro cyclical asset allocation model
based on both, quantitative factors as well as fundamentals.
The primary purpose of a dynamic asset allocation fund is to
generate equity linked returns with low volatility.
It can move anywhere between 30-80% in equity.
For tax calculation purposes, it is considered an equity
fund.
Additional reading: Click Here to read our complete review of Union Balanced Advantage 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 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 fund is more felt 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.
Edelweiss
Balanced Advantage fund portfolio
As on 31th July 2021, the fund was overweight on the
following sectors.
- Financials
- Technology
- Energy
- FMCG &
- Construction
Edelweiss Balanced Advantage fund is a pro cyclical balanced
advantage fund.
It cuts down on equity exposure when it feels the market is on
a downward spiral and increases equity exposure when the market is on the up.
This is unlike most balanced advantage funds.
The fund has always been an actively managed and well
diversified fund which can be attested by the fact that as on 31st July
2021, it held 113 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 31st
July 2021 is as under:
- Equity – 61.40%
- Debt – 22.20%
- Cash - 16.40 %
Unlike certain other balanced advantage funds, this fund is usually
on the lookout for a cyclical/value pick with respect to a particular sector
which should not be very surprising considering its pro cyclical system in
place.
This approach is undertaken keeping a favourable margin of
safety in mind.
Additional reading: Click Here to read all about the various types of hybrid mutual funds
Taxation
on Edelweiss Balanced Advantage Fund
For the purpose of taxation, Edelweiss 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.
What
is a good mutual fund portfolio?
A mutual fund portfolio and a good mutual fund portfolio are
not the same.
A mutual fund portfolio means the collection of various
mutual fund schemes but a good mutual fund portfolio means having a strong
strategy in place.
Selecting mutual fund schemes is the last step and often the
least important step, having a strong strategy in function is the most
important step.
Having a good mutual fund portfolio would mean considering
the following:
- Goals
- Time Horizon
- Current & Future Expenses
- Mode of Investment etc.
The above being in no particular order and not an exhaustive
list.
A good mutual fund portfolio along with having a strong
strategy and considering the above points will also be in a position to fulfil
your life goals.
Is
Edelweiss Balanced Advantage Fund truly a balanced advantage fund?
Even though technically speaking Edelweiss Balanced
Advantage Fund is classified as a balanced advantage fund, in functioning
though it is more of a flexi cap fund.
This balanced advantage fund follows a pro cyclical approach
rather than a counter cyclical approach.
This means the fund’s allocation towards equity rises with a
rise in market and decreases with a fall in market.
This is unlike most other balanced advantage funds.
Which is precisely why you need a higher time horizon of at
least 5 years for such an approach rather than the usual 3 years recommended
for a balanced advantage fund.
Although every balanced advantage fund is unique and
functions in a manner unique to others, the pro cyclical approach means the
fund works more like a flexi cap fund which can be attested by its equity
levels and equity distribution.
The point of a balanced advantage fund is safety first and
returns later.
The functioning of this fund is such that it gives more priority
to high returns than safety which should not be the case with a balanced
advantage fund.
The fund will usually give high returns with such an
approach but that is not the primary purpose of a balanced advantage fund, irrespective of the
strategy it applies.
If high returns is your sole concern then there is no point
at looking at a balanced advantage fund.
A balanced advantage fund makes little to no sense in such a
scenario.
For portfolio enquiries, email us with your doubts at info@themutualfundguide.com
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