In the past two years, gold has emerged as a strong contender for an investor’s portfolio. Especially, since markets have not done so well. And debt, while giving decent returns, is giving low inflation-adjusted returns (if any).
In such circumstances, investors need to have a judicious mix of the three asset classes to generate positive returns from their portfolio. Morgan Stanley Mutual Fund is trying to tap investors who are looking for such balance of instruments with its Multi-Asset Fund. The scheme will invest in all three asset classes – equities, debt and gold.
“Since the asset classes have low/negative correlation it reduces downside risk significantly without sacrificing returns. The Fund would endeavor to deliver consistent returns over the long term with much lower levels of volatility/risk”,” says Jayesh Gandhi, Lead Portfolio Manager, Mid/Multi Cap Equities, Morgan Stanley Mutual Fund.
The fund has two plans. Plan A – invests predominantly in debt, just 20 per cent will be allocated to equity and equity-linked products and is like a debt balance fund.
Plan B has the multi-asset flavour. But again, it is predominantly debt. The scheme will invest between 65-100 per cent in debt and the remaining in equity and equity related instruments and gold ETFs. The equity portion, at any given time, will not cross 20 per cent of the total assets. Since both the schemes are predominantly debt oriented, they it will be taxed accordingly – 10 per cent without indexation and 20 per cent with indexation.
The investment strategy of the scheme is a clear indication that the fund house is targeting conservative investors or retired people who are looking for regular income. The upside, in terms of returns, will be limited because of lower exposure to gold and equities. No wonder, the fund offers options of monthly and quarterly dividends which should help the retired or ones looking for additional income.
More From This Section
There are a few other schemes in this space as well – Axis Triple Advantage Fund, Canara Robeco InDiGo and ING OptiMix Financial Planning (conservative plan) all invest in equities, debt and/or gold Exchange Traded Funds (ETF) in varying proportions. But most are debt laden.
Canara Rebeco’s InDiGo is the only outstanding performer in this space with returns of 15.86 per cent in one year and 9.17 per cent in six months. The scheme has almost 30 per cent in gold and 70 per cent in debt.
The other two– Axis Triple Advantage and ING Optimix – have returned 1.9 per cent in six months. Both these schemes have equity exposures. Such mutual fund schemes are best suited for passive investors who are not able to manage various asset classes in their portfolios regularly, says Nelson D’Souza of Fundsupermart.com. “The investor need not spend too much time worrying about his portfolio allocation. If you can manage your portfolio across asset classes then you need not look at investing in such a fund”, he adds.
Investors with high risk appetite can invest ten per cent of their portfolio, while someone with a lesser risk taking ability can invest up to 40 per cent. The New Fund Offering (NFO) will open on January 17 and will close on January 31.