NFO review: Baroda Dynamic Equity Fund, saving the trouble of asset allocationVolatility has scared away more investors than actual declines. Staying put is important, but when things get nasty around you, it is important to hold emotions in control. There are certain investment structures that help you stay put. Perhaps, this is a reason why Baroda Pioneer Mutual Fund wants to offer its investors the same platform. It has launched a new fund offer, Baroda Dynamic Equity Fund, an open ended dynamic asset allocation scheme, that opened on October 22, 2018 and will close on November 02, 2018. Let us look at the product and read our take at the end.

Fund house speak 

Baroda Pioneer MF says equity markets over a period of time have built an established track record of wealth creation and delivered better returns than most other asset classes but often come with volatility which deter investors from investing. In turbulent times, usually the investor reacts emotionally and ends up selling all the holdings, instead of accumulating them at lower levels.

In order to help you steer through this volatility & help you achieve your financial goals, Baroda Dynamic Equity Fund is being marketed as a tailor-made solution for all market times. The fund is an open-ended dynamic asset allocation fund which primarily invests in a portfolio of equity & equity linked securities with the primary aim to generate capital appreciation & secondary objective to generate income through investments in debt & money market instruments.

Fund construct 

This fund is designed in such a way, that it equips the Fund Manager construct his portfolio based on, what Baroda MF calls, a proprietary model which predicts the equity allocation to be made in a disciplined manner, irrespective of the market scenario, thereby reducing the element of human bias. This strategy aids in participating in the long-term growth potential of advantages of investing in Baroda Dynamic Equity Fund.

  • No need to time the markets
  • Thrifty investing style
  • Elimination of Human bias during investing
  • Multi-Parameters strategy used for deciding the equity allocation
  • Reduced risk through Dynamic Asset Allocation
  • Monthly rebalancing
  • Downside protection through diversification
  • Tax efficient returns

The model used Price Earnings to capture the P&L aspect, Price/Book value to capture the Balance sheet aspect, Dividend Yield to capture the cash flow aspect and Earnings-Yield G Sec to capture market risk premium.

The fund-house says these four parameters are compared to their historical 5-yr averages.

Model results

The model limits your downside during a sharp downward market movement and has outperformed in a range bound market scenario.

Fund stance

The fund’s gross equity exposure will be maintained in the range of 65% to 100% while the net equity exposure will be maintained between 30% to 100%. The difference between gross and net variation would generally be invested in arbitrage or in arbitrage equity mutual funds. The exposure to Debt & Money Market Instruments including cash and cash equivalents will be maintained in the range of 0% to 35%.

Benchmark 

50% of BSE 200 & 50% of CRISIL Short Term Bond Fund Index.

Exit Load

If units are redeemed upto 10% of the units on or before one year from the date of allotment there will be no exit load.

If units are redeemed over and above the 10% limit on or before one year from the date of allotment, exit load is 1% of the applicable Net Asset Value (NAV).

If units are redeemed after one year from the date of allotment, there is no exit load.

Fund Managers

Sanjay Chawla (Equity) & Alok Sahoo (Fixed Income)

Peer category

The dynamic asset allocation space has 20 funds. The biggest ones are HDFC Balanced Advantage Fund (Erstwhile HDFC Growth), ICICI Prudential Balanced Advantage Fund and UTI Unit Linked Insurance Plan. The newest ones are Kotak Balanced Advantage Fund, Union Balanced Advantage Fund and Axis Dynamic Equity Fund.

RupeeIQ Take – Dynamic asset allocation fund returns are in wide range. In one year, the best fund among the 20 has given 8.5% gain, while the worst one has lost 7%. In 3-year period, the best fund has given 10% gain while the worst one has given 4%. In 5-year period, the best fund has clocked 16% rise while the worst one has delivered 10%. It’s all about your conviction in a fund-house’s methodology and trust in the fund manager’s ability. If you feel comfortable with Baroda Pioneer MF and do not have a dynamic asset allocation fund in your kitty, going for the scheme may be considered.

Disclaimer: Please note that investors are requested to consult their financial, tax and other advisors before taking any investment decision.