In times of corrections or when clear directional moves are hard to predict, investor attention goes towards hybrids. We are coming out of a correction and entering into an uncertain period – a time which reinforces the relevance of hybrid funds that invest across asset classes.
Nippon India has two multi asset solutions – very different from each other – with both comfortably outperforming benchmarks.
Its Asset Allocator FoF follows a multi factor model to implement dynamic asset allocation across equity, debt and precious metals while its Multi Asset Allocation Fund follows a static allocation model across domestic equity, international equity, debt, gold and other commodities.
Ashotosh says for investors who want simplicity and adequate diversification across a wide range of asset classes at all times, MAAF is a good solution while for investors who want nimble movements across asset classes to extract higher alpha, AA FoF is a great solution.
The fact that AA FoF is outperforming MAAF even as both outperform benchmarks, is evidence of the multi factor model delivering what it is aimed to do.
Ashutosh says investors should bear in mind that model based dynamic asset allocation funds run the risk of being low on equity as markets speed up towards cycle peaks while static allocation models maintain and simply rebalance their asset allocations, thus ensuring a desired level of diversification at all times.
Nippon India’s BAF has used this correction to increase net equity allocation to 60% and is thus well prepared to harness what looks like a rally coming out of a sharp correction.
Healthy performance and wide choice of hybrid solutions makes Nippon India MF a strong contender for investors’ hybrid allocations.