Financial planners said the mix of secure asset allocations in this fund can help it generate better returns than fixed income products, while its equity-oriented investments reduce tax expense.
Rupesh Bhansali, Head-Distribution, GEPL Capital, said, “Conservative investors looking to earn 100-200 basis points on fixed deposits with equity taxation and one-year time frame can consider this fund.”
The fund invests 15-16 per cent in equities and a maximum of 4.5 per cent in covered call options. About 80 per cent of the money is invested in arbitrage strategies and bonds.
The share of equity and arbitrage always exceeds 65 per cent to give equity taxation to investors. The fund, with assets under management of Rs 3,412 crore, has given a return of 17.28 per cent over the previous year.
The average return of the category is 21.61 per cent. The poor performance may be because its peers are managed more aggressively.
Compared to ICICI Prudential Equity Savings Fund15-16 per cent of the net equity allocation, put between 30 per cent and 45 per cent in other stocks in the category.
If the bullish momentum reverses then the conservative strategy will help it outperform.
After the unilateral move in the stock markets after March 2020, many investors have seen an increase in their equity allocation. The wealth manager is asking them to take some money off the table.
“After a sharp rally, investors with a one-year time frame can allot such funds and reduce their equity allocation,” said Nasir Saleem, managing partner, Boutique Flexi Capital LLP. Investment service firm.
Distributors said the fund category has not gained popularity as equity allocation by many fund schemes is high, making it unsuitable for conservative investors and leaves little gap between it and Balanced Advantage Fund.