Canara Robeco Mutual Fund has introduced a multi-asset allocation fund that aims to lower downside risk during downturns and produce alpha when markets are performing well.
The Canara Robeco Multi Asset Allocation Fund will make investments in debt, equity, and exchange-traded funds (ETFs) for gold and silver.
What’s available?
Navigating all market circumstances is the goal of the active multi-asset allocation strategy. In order to facilitate portfolio alignment, the fund will concentrate on periodically optimizing asset classes in response to shifting economic conditions, earning momentum, market valuation, and equity risk premium.
Ten to twenty-five percent of the hybrid fund’s total assets will go toward gold and silver exchange-traded funds (ETFs), ten to twenty-five percent will go toward debt and money market instruments, and 65 to eighty percent will go toward equity and equity securities. The plan might also make investments in InvITs and REITs.
The benchmarks for the Canara Robeco Multi Asset Allocation Fund will be the 20% NIFTY Short Duration Debt Index, the 65% BSE 200 TRI, the 10% domestic price of gold, and the 5% domestic price of silver.
The fund will be managed by Kunal Jain, Fund Manager – Fixed Income, Ennette Fernandes, Fund Manager – Equities, and Amit Kadam, Fund Manager – Equities.
How is the portfolio going to be put together?
The portfolio will be dynamically balanced in response to shifts in the underlying market and economic cycles. “Our Internal Research Framework will serve as the basis for the allocation,” stated Shridatta Bhandwaldar, Head of Equities at Canara Robeco Mutual Fund.
The fund’s internal research on factors including the economy, earnings, and valuation will determine the equity allocation and help determine whether to grow or decrease the net equity allocation within the 30- to 80 percent range.
According to Bhandwaldar, “we will reduce the equity allocation towards 30 percent to avoid drawdown when these indicators are trending negatively, and we will move the equity allocation towards 80 percent to enhance the returns when these indicators are trending positively.”
.Although stock selection is not given as much weight in asset allocation, the equity portfolio is intended to be highly diversified and sharp, with a small number of companies with strong convictions.
“We will invest in only those companies which are either leaders in their sectors, having a long track record of growing across market cycles, or challengers within sectors growing ahead of the market by gaining market share, or some emerging themes which have significant high-growth opportunities,” said Bhandwaldar.
How should investors proceed?
Mutual funds and portfolios have suffered, and investor confusion has been exacerbated by global volatility fueled by geopolitical risks, the US trade war, and tensions between India and Pakistan.
Multi-asset allocation funds (MAAFs) are becoming a very attractive option in this unpredictable climate.
They offer intrinsic diversification that reduces volatility and adds stability by combining debt, stock, and gold. They also balance potential and risk with their dynamic flexibility to reallocate in line with market cycles.
The fact that moving between asset classes inside the fund has no tax ramifications, which improves after-tax efficiency, is one of the main advantages.
Vinod Jhaveri, an analyst at Pure Technicals, claims that allocation to various asset classes serves a variety of purposes because the outperformance or underperformance of each asset class varies depending on the market and the state of the economy.
“Investing in a multi-asset allocation fund makes sense because it offers better risk-adjusted returns and has fewer downside risks,” Jhaveri stated.
For cautious investors who want to leave asset allocation choices to fund managers, multi-asset allocation funds are a good option.
Asset allocation funds are an intriguing choice for these investors due to the current equities prices and the short-term uncertainty surrounding growth. These funds might also aid in lowering the volatility linked to stocks, given the inverse relationship between gold and stocks. As an alternative to a new fund, investors may choose to invest in one of the established funds in this category that have a strong track record, according to Nilesh D. Naik, Head of Investment Products at Share.Market (PhonePe Wealth).
