Will 2018 be the year of balanced advantage schemes?

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Raghav Iyengar, EVP & Head - Retail and Institutional Sales, ICICI Prudential AMC.

The year 2017 was a remarkable one of the Indian Mutual Fund industry. Not only did the markets stage a stellar rally; for a change the retail investors participated in it too. The AUM of the industry crossed the Rs. 20 lakh crore mark in a breeze, which was a long shot just 18 months back. This was at a time when the transient effects of demonetization and GST implementation could was threatening to derail the rally. That's where the domestic investors stepped in eclipsing the foreign investors in terms of investments made, and thereby aiding the market to continue its northward journey.

And if the journey was any interesting, what made the ride epic was the rise of the Balanced Fund scheme emerging as the preferred choice of investment, among all the mutual fund products available, thanks to the increasing acceptance of volatility suite of products. However, going forward, given that the market has rallied, it is time to reconsider the investment decisions for 2018.

Given that the Indian markets have been buoyant, many investors who have been on the sidelines finally made an entry into the mutual fund space by investing in equity/balanced schemes. The same is true for those investors who have been waiting for a 'market correction.' Going forward as more and more investors start entering the market, especially the first time equity investors, it's important to get the investment and the expectations set right.

This is where balanced advantage category of schemes comes to the fore. Here the investments made are invested across equity and debt asset classes, depending on the relative attractiveness of an asset class. In the current market condition, such an investment would mean reducing positions in the best-performing asset class (equity), while adding to positions in another asset class (debt). The auto rebalancing ensures that emotions are placed aside thereby following a 'Buy Low and Sell High' strategy.

Given below is a snapshot of the ICICI Prudential Balanced Advantage Fund net equity exposure as on November 30, 2017.

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Source: NSE India & MFIE, As on 30th November 2017. The in-house valuation model starts from March 2010 onwards. The information contained herein is solely for private circulation for reading/understanding of registered advisors/distributors and should not be circulated to investors/prospective investors.

By investing in such a fund what an investor essentially attains is equity participation at a reduced risk profile. Since the Indian equity markets have rallied sharply over the last two years, with the valuations being stretched at some pockets, it is very likely that market are likely to be volatile. At such instances, the presence of debt will add a cushioning effect to the investments made, as can be seen in the illustration below.

Returns Experience in All types of Market Conditions

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Source: MFIE & Internal, past performance may or may not be sustained in future. I Pru BAF stand for ICICI Prudential Balanced Advantage Fund. The information contained herein is solely for private circulation for reading/understanding of registered advisors/distributors and should not be circulated to investors/prospective investors.

Latest Performance of ICICI Prudential Balanced Advantage Fund

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Source: MFIE, NAV as on 30th November 2017. Returns (%) are CAGR. Past performance may or may not be sustained in future. The information contained herein is solely for private circulation for reading/understanding of registered advisors/distributors and should not be circulated to investors/prospective investors.

Recent SIP Performance

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Source: MFIE, SIP starting Date is 1st December & Ending date is 30th November for respective periods. Closing on 30th Nov 2017. Report Date (NAV Date): 30th November 2017.Past performance may or may not be sustained in future. IPru BAF stands for ICICI Prudential Balanced Advantage Fund - Growth Option.

From the above table, it can be seen that even with reduced equity levels, the fund's return profile has matched that of the benchmark indices, in most of cases barring run-away equity rallies. Also, an investor can be rest assured that the investments made are well spread across asset classes to make the most of market opportunities.

Therefore, for incremental investments into equities, one can opt for balanced advantage category of funds.

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Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

The information contained herein is only for the reading/understanding of the registered Advisors/Distributors and should not be circulated to investors/prospective investors. All data/information in this material is specific to a time and may or may not be relevant in future post issuance of this material. ICICI Prudential Asset Management Company Limited (the AMC) takes no responsibility of updating any data/information in this material from time to time. The AMC (including its affiliates), ICICI Prudential Mutual Fund (the Fund), ICICI Prudential Trust Limited (the Trust) and any of its officers, directors, personnel and employees, shall not liable for any loss, damage of any nature, including but not limited to direct, indirect, punitive, special, exemplary, consequential, as also any loss of profit in any way arising from the use of this material in any manner. The sector(s)/stock(s) mentioned in this communication do not constitute any recommendation of the same and ICICI Prudential Mutual Fund may or may not have any future position in these sector(s)/stock(s). Past performance may or may not be sustained in the future. Nothing contained in this document shall be construed to be an investment advise or an assurance of the benefits of investing in the any of the Schemes of the Fund. Recipient alone shall be fully responsible for any decision taken on the basis of this document



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