Financial planners said the mix of safer asset allocation in this fund could help it generate better returns than fixed income products, while its equity-oriented investments reduce the tax outgo.
“Conservative investors looking to earn 100-200 basis points over fixed deposits, with equity taxation, and time frame of a year can consider this fund,” said Rupesh Bhansali, head-distribution at GEPL Capital.
The fund deploys 15-16 per cent of the corpus in equity and a maximum of 4.5 per cent in covered call options. Around 80 per cent of the money is put in arbitrage strategies and bonds.
The equity and arbitrage portion always exceeds 65 per cent to give equity taxation to investors. The fund, which manages assets of Rs 3,412 crore, has returned 17.28 per cent over the last year.
The category average returns are 21.61 per cent. The underperformance could be because its peers are more aggressively managed.
Compared to ICICI Prudential Equity Savings Fund’s 15-16 per cent pure equity allocations, others in the category put between 30 per cent and 45 per cent into stocks.
The conservative strategy would help it outperform if the bullish momentum reverses.
After the near one-way move in the stock markets post-March 2020, many investors have seen their equity allocations rise. Wealth managers are asking them to take some money off the table.
“Investors looking to rebalance and reduce their equity allocation after the sharp rally could allocate to such a fund, with a time frame of one year,” said Nasser Salim, managing partner, Flexi Capital LLP, a boutique investment services firm.
Distributors said the fund category hasn’t gained popularity as equity allocation by many fund schemes is high, making it unsuitable for conservative investors and leaving little differentiation between this and balanced advantage funds.
