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  • MF News Axis MF launches dynamic asset allocation fund

    Axis MF launches dynamic asset allocation fund

    The fund house will not just consider price-to-earnings ratio in selecting its asset allocation, it will also take into account market trend and volatility.
    Daya Ragunathan Jul 11, 2017

    Axis Mutual Fund on Monday announced the launch of its new open-end dynamic asset allocation fund called Axis Dynamic Equity Fund. The NFO for the scheme is currently open for subscription and closes on July 25.

    Explaining how this scheme is different from existing funds, Chandresh Kumar Nigam, MD and CEO, Axis Mutual Fund, said that the fund house will consider the market trend and volatility apart from price-to-earnings ratio. “While most schemes only consider the price-to-earnings ratio to decide asset allocation of the scheme, we are going to take a more holistic approach by taking into account the prevailing market trend and volatility. Based on the recommendations of this model, we will review the fund every two months and make the necessary corrections,” he says.

    Explaining the rationale behind such a strategy, the MD and CEO of the fund house referred to a study conducted by Axis Mutual Fund, which shows that there is more than 6% gap between the average returns given by an equity fund and the returns realised by investors. Attributing this gap to the investor’s irrational behaviour, he says, “With this new scheme we want to give investors a fund suitable for any market.

    The AMC claims that the back testing of the fund revealed that it would beat the index across market cycles.

    Explaining the asset allocation strategy, the Axis MF chief says the fund will have at least 65% exposure to equity at all times. “When the markets are favourable we will have even up to 100% equity exposure. However, when we need to be more cautious we will be having 30% in net equity, 35% in arbitrage and the remaining in fixed income. The model itself will decide the proportion of equity exposure,” says Chandresh.

    Once the model decides the equity allocation, the fund manager, would then construct the stock portfolio, which would be a multi-cap portfolio built on a bottom-up basis. The role of the model is limited to deciding the equity allocation only, he adds.

    The fund house is expecting inflows up to Rs1,500 crore into the scheme. “We do not have any fixed targets as such, but for a scheme of this type which moulds itself to give the best return in any market condition, I think we can expect an inflow anywhere between Rs1,000 crore and Rs1,500 crore,” Chandresh says.

    Axis Mutual Fund recently became the 10th largest fund house, overtaking IDFC Mutual Fund. Currently, the fund house manages AUM of Rs63,600 crore, as on June 2017.

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