Asset allocation model of 'balanced advantage funds' must fit your needs

Check fund's performance in different market conditions to evaluate efficacy of model

With both equity and debt markets turning volatile, experts are recommending balanced advantage funds (BAFs), also called dynamic asset allocation funds, to retail investors. One reason is that these funds have the ability to offer downside protection. Year-to-date, while the Nifty 50 Total Return Index has fallen 6.8 per cent, the BAFs category has declined 3.5 per cent. These are all-weather funds.

“Investors can put money into these funds, irrespective of market conditions,” says Bhavesh Jain, fund manager, Edelweiss Mutual Fund. Despite being hy­brid funds, they receive equity-like tax treatment.

Two models

BAFs invest in a combination of equity, arbitrage,