WHAT ARE BALANCED ADVANTAGE FUNDS (BAF)?
Balanced benefit funds (BAFs) are mutual fund schemes that put money into a mixture of two asset lessons, particularly debt and fairness. The proportion allocation to fairness is dynamic and relies on fashions constructed by the fund home’s analysis staff. Sometimes, when market valuations are excessive, the fund supervisor could tilt the allocation extra in the direction of debt by promoting fairness and and after they flip low-cost allocate extra to fairness. Such a method helps buyers preserve asset allocation.HOW MANY INVESTORS HAVE PUT MONEY IN THE BALANCED ADVANTAGE FUND CATEGORY?
There are 35 schemes within the balanced benefit fund area with 5,250,000 folios that handle belongings price `2.93 lakh crore as of April 30, 2025.
WHAT ASSET ALLOCATION MODELS ARE USED BY BAFs?
Fund homes use inhouse fashions developed by the analysis staff to resolve the proportion allocation to fairness and debt. Most fund homes use a pro-cyclical mode which buys extra fairness when it sees cheaper valuations and vice-versa. Fund managers can use a mixture of elementary and technical components like priceto-earnings ratio, price-to-book ratio and development indicators like each day transferring common to reach at fairness allocation and construct their mannequin. Some fund homes additionally use a counter-cyclical mannequin which will increase fairness allocation in rising markets.
WHO SHOULD INVEST IN BALANCED ADVANTAGE FUNDS?
Many buyers are transferring cash from mounted deposits to mutual funds and want to earn a little bit greater than mounted deposits. Such buyers may contemplate an allocation to balanced benefit funds. This may give them a greater expertise as an alternative of diversified fairness funds the place volatility might be larger
HOW ARE BALANCED ADVANTAGE FUNDS TAXED?
These funds are structured in such a method that they’re taxed as fairness funds for buyers. This implies buyers might want to pay 12.5% long-term capital positive aspects tax in the event that they promote their items after holding for one 12 months. When such a scheme lowers its fairness publicity, it ensures that the fairness plus arbitrage element of the scheme is no less than 65% of the corpus, which helps it qualify for fairness taxation.
