Due to high volatility, equity markets have consistently disappointed country’s retail investors and mutual funds have also fallen a pray to the unstable markets and reported declines in their net asset values (NAV).
Amid a scenario where almost all retail investors have given up trading, DSP BlackRock Mutual Fund launched its open- ended fund of funds scheme, DSP BlackRock Dynamic Asset Allocation Fund (DAAF), which offers investors peace of mind and enable them in long term wealth creation.
As per the fund house, the DAAF will dynamically manage the asset allocation between the specified equity mutual fund schemes and debt mutual funds schemes of DSP BlackRock Mutual Fund, based on the relative valuation of equity and debt markets. The new fund is open for subscription from January 17 to 31.
Explaining how DAAF would work, Ajit Menon, Executive Vice President of the fund house said, “The fund has been created with focus on inflation and would provide automatic entry and exit to investors from equity and fixed income schemes. The fund closely tracks the yield gap and modified yield gap ratios which identifies where the investor money should be allocated. In india, high inflation results in high rate of interest and hence poor performance from equity markets. In times of high inflation, the fund would automatically invest money in fixed income schemes to help prevent losses to investors and once interest rates start easing, the proportion of equity investment would also increase to help generate larger returns.”
DAAF would put in use automatic rebalancing of portfolios with the help of the Yield gap ratios, which is the ratio of debt market to equity market yield and this would determine the asset allocation and more secure route for investors to avoid risks of equities during market downturns.
Since the last few weeks, country’s retail investors has been kept busy as on one hand they are tackling the volatile equity markets on one hand and on the other they facing a dilemma of whether to invest or not in stocks.
Further commenting on the interest rate situation and equity markets of the country, Menon said, “After a decline in inflation, we expect the interest rates to cool off towards the second half of the year. As far as stock markets are concerned, we are expecting cyclic sectors to perform better.”
Through DAAF, product tailor made for the troubled retail investor, the fund house hopes to garner around Rs 500 crore during the initial fund offer period. DSP BlackRock MF is a joint venture between the DSP Group and BlackRock in which DSP Group holds 60 per cent stake and the fund house has an average assets under management of Rs 32,642 crore at end December.
The scheme would be investing primarily in DSP BlackRock Top 100 Equity Fund and DSP BlackRock Equity Fund to get equity exposure and DSP BlackRock Strategic Bond Fund and DSP BlackRock Short Term Fund to get debt exposure.