For passive investors

In the past two years, gold has emerged a strong contender for an investor's portfolio, especially since the markets have not done so well. In debt, though the returns are decent, these turn low when adjusted against inflation.

In such conditions, investors need to have a judicious mix of the three asset classes to generate positive returns. Morgan Stanley Mutual Fund is trying to tap investors looking for such a balance 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 the downside risk significantly without sacrificing returns. The fund would try 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.
 

BALANCED INVESTING
Mutual fund scheme	What they invest in	How they are taxed	6-month returns (%)	1-year  returns (%)
Axis Triple  Advantage	Equity, fixed  income income  and gold ETFs	Same as a debt fund *	1.92	6.41
Canara Robeco  InDiGo	Debt & gold ETFs	Same as a debt fund	15.86	1.92
ING OptiMix Financial  Planner	Debt, equity &  gold ETFs

Same as a debt fund 1.90

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*Long term: 10% without indexation or 20% with indexation, whichever is lower, +3% cess. Short term: According to tax slabs. Returns as on January 17
Source: Value Research

The fund has two plans. Plan A invests predominantly in debt, with just 20 per cent being allocated to equity and equity-linked products. This 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 and 100 per cent in debt and the rest in equity and equity-related instruments and gold exchange traded funds (ETFs). The equity portion, at any given time, will not cross 20 per cent of the total assets. Since both schemes are debt-oriented, these will be taxed accordingly — 10 per cent without indexation and 20 per cent with it.

The investment strategy indicates the fund house is targeting conservative investors and retired people looking for regular income.

The upside, in terms of returns, will be limited, because of lower exposure to gold and equities. The fund offers monthly and quarterly dividends; this should help the retired or ones looking for additional income.

A few other schemes in this space such as Axis Triple Advantage Fund, Canara Robeco InDiGo and ING OptiMix Financial Planning (conservative plan) invest in equities, debt and/or gold Exchange Traded Funds (ETF) in varying proportions. But most are debt-oriented.

Canara Rebeco's InDiGo is the only outstanding performer, with returns of 15.86 per cent in one year and 9.17 per cent in six months. It has 30 per cent in gold and 70 per cent in debt.

The other two have returned 1.9 per cent in six months. Both have equity exposures. These 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, you need not invest in such a fund," he adds.

An investor with a high-risk appetite can invest 10 per cent of his portfolio, while one with a lesser appetite can invest up to 40 per cent. The New Fund Offering will open on January 17 and close on January 31.