LIC Mutual Fund plans to introduce Balanced Advantage Fund, strives to fund across equity, debt and money markets

According to the asset management company, the investment strategy for LIC MF Balanced Advantage Fund will be based on a fundamental-driven mathematical model.

LIC Mutual Fund Asset Management Ltd will start a balanced advantage fund, an open-ended active asset allocation fund, which will fund across equity and debt and money market tools using parameters such as valuation and earning drivers.

The new fund offer (NFO) will begin subscription on 20 October and end on 3 November. Fund managers for LIC MF BAF will be Yogesh Patil for the equity share and Rahul Singh for the debt share.

LIC MF BAF is benchmarked against a customised index, LIC MF Hybrid Composite 50:50 Index. The index composition will be 50% Nifty 50 TRI and 50% Nifty 10-year Benchmark G-Sec.
The stock will strive to hold a gross equity allocation of 65% or more to allow investors to avail of equity taxation benefits.

Balanced advantage funds have seen a definite rise in their reputation over the past years. This is because asset management companies (AMCs) use derivatives to decrease the adequate equity exposure below 65% while keeping the gross exposure at or above 65%.

This guarantees equity-like taxation at a more moderate risk level. If an equity-oriented mutual fund is restored after one year, investors are taxed 10% for capital gains over ₹1 lakh. According to the asset management company, the investment strategy for LIC MF Balanced Advantage Fund will be based on a fundamental-driven mathematical model.

Explaining the model-based unique investment strategy, Dinesh Pangtey, CEO, LIC Mutual Fund, said, “Bond yields, in a way, represent the opportunity cost of investing in equities and perception of risk appetite. We at LIC MF would be using this inverse relationship between equity and debt in LIC MF BAF for switching from equity to debt and vice versa, based on a fundamental driven mathematical model.”

The LIC MF BAF model will use this connection to ascertain the optimal asset allocation level for the plan. To arrive at the optimum asset allocation level, the model manages interest rates, one-year forward price-earnings ratio, and earnings yield. There will be a 1% exit load for improvement before one year to be charged only above 12% of units distributed. There will be nil exit load after the conclusion of 12 months from the date of allotment.

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