Edelweiss Balanced Advantage Fund Review

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 31^th 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 31^st 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 31^st 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.

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Disclaimer : While due precaution has been undertaken in the preparation of this article, The Mutual Fund Guide or any of its authors will not be held liable for any investments based on the above article. The above article should not be considered financial advice and has been published only for your perusal. Due credit has been given in case wherever required, in case you feel any part violates any rights then do get in touch with us and we shall get it duly removed.

Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing