Bajaj Finserv Launches Balanced Advantage Fund With Behavioural Model Of Investing, What Is This Category?

Bajaj Finserv launches the Balanced Advantage Fund, using dynamic asset allocation and behavioral insights for determining asset allocation
Mutual Funds
Mutual Funds

Bajaj Finserv BAF 

Despite Sebi permitting 0-100 per cent equity or debt, Bajaj Finserv BAF will maintain gross equity and equity related exposure between 65 per cent to 100 per cent. The net equity exposure can be brought down below 65 per cent through various derivative strategies, the fund house says.

The fund claims to integrate Behavioral Sciences and Financial Insights for effective market navigation. Rather than using only fundamentals and past performance to decide allocation, the Bajaj Finserv AMC investment team analyses behavioural aspect as well, to decide on asset allocation and timing of investments, the fund house explained in a release.

“The Bajaj Finserv AMC BAF model estimates the fair market value based on future earnings per share, growth expectations, and interest rates, guiding the core investment strategy. The fund's behavioural indicator helps navigate market volatility and optimise returns by fine-tuning entry and exit points. It also guides equity allocation, increasing it when the market is undervalued and reducing it when it's overvalued,” the fund house said.

Nimesh Chandan, CIO of Bajaj Finserv Asset Management said, "The crowd isn't always wrong. So, selling whenever the equity market rises and buying every time the market falls may not be the best asset allocation strategy. It's crucial to identify where the crowd has overreacted in either greed or fear and capitalise on that response. Fundamental analysis tools provide us with an assessment of the market's fair value, while behavioral analysis techniques give us insights into change in market bias between bullish and bearish."

Chandan believes that a combination of fundamental analysis tools, which provide an assessment of the market's fair value, and behavioral analysis techniques, which reveal change in market sentiment between bullish and bearish, can help investors identify these opportunities.

 Bajaj Finserv Asset Management launched Bajaj Finserv Balanced Advantage Fund (BAF) today, a dynamic asset allocation fund, catering to investors eyeing primarily equity and derivatives, but alongside fixed income instruments.

The new fund offer (NFO) runs from November 24 to December 8, 2023, with minimum lump sum applications starting from Rs. 500. SIP investments range from Rs. 500 to Rs. 1,000, with minimum 60 installments but if above Rs 1,000, a minimum of six installments.

An exit load of 1 per cent is incurred if over 8 per cent of units allotted are redeemed within 6 months from the date of allotment.

What Are Balanced Advantage Fund?

Bajaj Finserv BAF falls under the Sebi categorization of Dynamic Asset Allocation or Balanced Advantage Fund that is allowed to manage investments dynamically between equity (0 per cent to 100 per cent) or in debt instruments (0 to 100 per cent allocation).

Presently, this category has 27 funds, and shows a one-year category average of 13.35 per cent as of November 23, 2023, and 12.67 per cent and 11.76 per cent returns over three and five years, respectively.

Bajaj Finserv BAF 

Despite Sebi permitting 0-100 per cent equity or debt, Bajaj Finserv BAF will maintain gross equity and equity related exposure between 65 per cent to 100 per cent. The net equity exposure can be brought down below 65 per cent through various derivative strategies, the fund house says.

The fund claims to integrate Behavioral Sciences and Financial Insights for effective market navigation. Rather than using only fundamentals and past performance to decide allocation, the Bajaj Finserv AMC investment team analyses behavioural aspect as well, to decide on asset allocation and timing of investments, the fund house explained in a release.

“The Bajaj Finserv AMC BAF model estimates the fair market value based on future earnings per share, growth expectations, and interest rates, guiding the core investment strategy. The fund's behavioural indicator helps navigate market volatility and optimise returns by fine-tuning entry and exit points. It also guides equity allocation, increasing it when the market is undervalued and reducing it when it's overvalued,” the fund house said.

Nimesh Chandan, CIO of Bajaj Finserv Asset Management said, "The crowd isn't always wrong. So, selling whenever the equity market rises and buying every time the market falls may not be the best asset allocation strategy. It's crucial to identify where the crowd has overreacted in either greed or fear and capitalise on that response. Fundamental analysis tools provide us with an assessment of the market's fair value, while behavioral analysis techniques give us insights into change in market bias between bullish and bearish."

Chandan believes that a combination of fundamental analysis tools, which provide an assessment of the market's fair value, and behavioral analysis techniques, which reveal change in market sentiment between bullish and bearish, can help investors identify these opportunities.

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