Mutual Funds
Axis Dynamic Balanced Fund: Using hedging strategies could be risky

The new scheme from Axis Mutual Fund will use hedging strategies to ‘manage’ risk

Axis Mutual Fund plans to launch a new scheme—Axis Dynamic Balanced Fund. This scheme will follow a new approach to dynamic investing. The new scheme will maintain its allocation to cash equity within the range of 65%-100% of the portfolio (similar to other balanced schemes). But, around 0%-65% will be invested in equity derivatives as a hedging strategy. Therefore, the net allocation towards equity will be around 0%-100%. The debt portion of the scheme will vary from 0%-30%. Similar to other balanced schemes, this scheme will seek capital appreciation by investing in a portfolio of equity or equity-linked securities while the secondary objective is to generate income through investments in debt and money market instruments. The difference here is that the scheme will ‘manage’ its risk by using hedging strategies.

In a recent issue of Moneylife magazine (Issue dated: 21 March 2013), we wrote how dynamic equity schemes try and time the market. These schemes vary their allocation to equity depending on either a proprietary method or on the price to equity ratio (P/E) of the Nifty index. Recently ING Mutual Fund filed an offer document to launch a scheme— ING Forward P/E Ratio Fund—which would vary its allocation based on the forward P/E of the index (Read: ING Forward P/E Ratio Fund: Another dynamic scheme with a new concept).

Fund managers try and lure investors with strategies that try and deliver superior returns by trying to predict the movement of the market. Unlike other equity schemes that invest a fixed proportion to equity, in dynamic schemes, the percentage allocated to equity is decided by the fund management. Therefore, if the fund management makes a wrong call, it would negatively impact returns. This scheme from Axis Mutual Fund will use derivative hedging strategies which involve high level of risk. Therefore, investing in this scheme may involve a higher risk compared to other balanced schemes.

Another aspect of dynamic schemes that we have covered in the past is that apart from getting the asset allocation right, the fund managers have to pick the right stocks as well. In this new scheme the fund manager would have to decide the right hedging strategy as well.

Axis Mutual Fund has a track record of just of three years in managing equity schemes. This is too short a period to comment on the fund management performance of the fund house. This new scheme will be managed by R Sivakumar and Jinesh Gopani, both of whom have an experience of over ten years in the industry.


Other details of the scheme:


50% S&P CNX Nifty + 50% CRISIL Composite Bond Fund Index

Minimum Application Amount

Rs5,000 and in multiples of Re1 thereafter

Minimum Additional Purchase Amount

Rs100 and in multiples of Re1 thereafter

Exit Load:

3% if redeemed/switched out up to 6 months from the date of allotment

2% if redeemed/switched out after 6 months & up to 12 months from the date of allotment

1% if redeemed/switched out after 12 months & up to 24 months from the date of allotment.



Ramesh Poapt

4 years ago

If the benchmark is 50%CNX Nifty,then will it be a 'eqty oriented fund'? Axis schemes performance so far is ok, Tax plan is good performer. Triple Adv. and Midcap has performed satisfactorily.Butit will be very challenging to manage the new scheme for Axis.

Government says not issued any guidelines on CSR spending yet

The ministry of corporate affairs has not yet issued any guidelines for reporting of corporate social responsibility spending by companies

The Union government on Monday said it has not issued any guidelines for reporting of spending by companies on social welfare activities. It said suitable norms for reporting of the corporate social responsibility (CSR) would be in place after the new Companies Bill comes into force.
In a written reply in the Rajya Sabha, corporate affairs minister Sachin Pilot said, “The ministry has not issued any guidelines for reporting of CSR spending by companies”.
“However, after the Companies Bill, passed by the Lok Sabha and under consideration of the Rajya Sabha, comes into force, suitable rules/guidelines will be issued to give effect to the provision of CSR contained in Clause 135 of the Bill,” he added.




4 years ago

Commonly, ‘Corporate Social Responsibility’ is understood as another name for charity. The government’s and Corporates’ hesitant approach to CSR can turn out to be harmful to the country and in the process to corporates also, in the long run. Spending for supporting social causes, by and large, has remained at the bottom end of the priorities for government and corporates so far. Those rich individuals from certain corporate empires who have started recognizing CSR as part of their way of life have done so either late in life or because of ‘certain compelling circumstances in life’ which they had not bargained for. Without struggling to put together a legal definition for CSR, or waiting for a diktat from government via legislation, those who are lucky to govern and manage resources which ultimately belong to the society should take on themselves the responsibility to eradicate hunger and poverty, provide shelter and potable water, promote literacy at least to the school level, ensure reasonably affordable healthcare for those in the ‘command area’ of their governance or business/industry. Fixing a percentage or routing money through PM’s Relief Fund are all niceties which may cover shame but will hardly ensure acceptable quick results.

Will RBI succumb to pressure by cutting rates?

With moderation in the economy and core inflation, pressure is mounting on the Reserve Bank to reduce interest rates by up to 50 bps and address liquidity concerns to boost growth

The Reserve Bank of India (RBI) is under pressure from all quarters to reduce interest rates by 50 basis points (bps) for addressing liquidity concerns in its upcoming monetary policy review on 19th March.
After meeting the chiefs of public sector banks (PSBs), union finance minister P Chidambaram said that the RBI governor was also aware of the liquidity issue and he hoped that the central bank would address it in its mid-quarter review on Tuesday.
Chidambaram said several PSBs have statutory liquidity ratio (SLR) of 23%, in excess of the statutory requirement and are earning interest on it instead of lending it to industries.
State Bank of India (SBI) chief Pratip Chaudhuri also said an interest rate cut of 0.5% is needed. He said, “We have requested 50 basis points cut in cash reserve ratio (CRR) and 0.5% cut in repo rate. We have also requested to increase the export credit refinance, which is currently 50% of the rupee credit. We have requested them to increase it to 100%.’’
Core or manufactured inflation came down to 3.8% in February, the lowest in 35 months. However, overall WPI inflation remained high at 6.84% mainly on account of high food prices.
While the January factory output numbers have showed signs of improvement, growing at 2.64%, the economy is estimated to have grown at a decade low of 5% in the current fiscal.




4 years ago

Larsen & Toubro , BHEL appears to be a long term bet for the Infra/Capex, considering extremely poor performance of other companies.

However consdiering the Advance tax oaid by Larsen & Toubro being a very small fraction of what it paid last year , The invvestors are advised to tread carefully, Better bet could be renter Larsen & Toubro only when it corrects to 1300 to 1350 levels, No shares are likely to gallop in the current market scenario. The share has already appreciated from 1350 level to 1540 and correcting now.
BHEL however is paying twice dividend per year and Dividend yield alone is in excess of 3% , appears very attracive to invest at sub 200 levels for mid term

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