BOI AXA Mutual Fund has launched an open ended fund called BOI AXA Equity Debt Rebalancer Fund. The NFO of the fund is currently open for subscription and will close on March 7, 2014.
The fund aims to generate long term returns by following a disciplined allocation between equity and debt securities. This allocation will be based on the month-end P/E ratio of the CNX Nifty Index. The fund will have higher exposure to equity when market valuations are low and higher allocation to debt when the valuations are stretched. For instance, if the valuation of the broader market measured by P/E ratio is high, the fund will take greater exposure to debt and vice versa. The proportion between equity and debt securities is determined by P/E bands.
Table showing fund strategy in different market conditions
|
Month end CNX Nifty P/E Ratio Band |
% of exposure in equity components |
% of Exposure in debt component |
|
Below 8 |
90 |
10 |
|
8 to 12 |
80 to 90 |
10 to 20 |
|
12 to 16 |
60 to 80 |
20 to 40 |
|
16 to 20 |
40 to 60 |
40 to 60 |
|
20 to 24 |
20 to 40 |
60 to 80 |
|
24 to 28 |
10 to 20 |
80 to 90 |
|
Above 28 |
10 |
90 |
The fund will compute an annual average of its monthly holdings in the portfolio for tax treatment. The fund would be considered as equity fund for taxation if average holding in equity exceeds 65%.
In a press release, the fund house says that the fund is suitable for investors who are looking for capital appreciation over the long term as well as asset allocation between both equity and fixed income based on equity market valuations.
The fund will be benchmarked equally on the CNX Nifty and Crisil Short Term Bond Fund Index. The minimum application amount is Rs 5000. The scheme will charge an exit load of 1% if redeemed within one year. No exit load would be charged thereafter. Alok Singh (Debt) and David Pezarkar (Equity) will co-manage the fund.