Last Updated on December 29, 2021
This is a review of Edelweiss Balanced Advantage Fund, an open-ended dynamic asset allocation fund. In its 12th year, the fund has an AUM of Rs. 1496 crores. It varies its equity exposure between direct equity and arbitrage as per market conditions but will remain an “equity fund” with respect to taxation.
Depending on market conditions, direct equity exposure can vary between 30% (rest 35% in arbitrage) to 80%. The scheme has the freedom to use quantitative models for asset allocation and security selection. As is usual for many funds, the scheme document reveals little about the equity asset allocation strategy.
The scheme presentation refers to an “Edelweiss Equity Health Index” with vague details on how it is computed with a combination of trend and fundamentals. It sometimes resembles a momentum indicator with equity investment increasing during bull phases and decreasing during bear phases. From 60-ish per cent direct equity in early 2020, it dropped by half at the bottom of the crash (later-March) and quickly shot back up to about 70% in the last couple of months (see below).
Edelweiss Absolute Return Fund became Edelweiss Dynamic Equity Advantage Fund from May 2017 and Edelweiss Balanced Advantage Fund from June 2018 with a similar investment strategy over the years. The asset allocation history is shown below.
The fund typically does not tactically vary equity and debt levels as much as it varies direct equity and arbitrage levels. This is a screenshot of the net equity (direct equity) exposure from the scheme presentation.
Edelweiss Balanced Advantage Fund vs Nifty 50 TRI
Since Jan 2013, the fund (direct plan) has fared well with respect to Nifty 50. The fund’s primary benchmark is CRISIL Hybrid 50+50 Moderate Index.
The lower drawdown of the fund is apparent from the above as well the three-year rolling returns shown below. Notice the significantly lower spread between max and min return over the period studied.
Who should invest in Edelweiss Balanced Advantage Fund? This fund would naturally underperform Nifty 50 during bull phases and outperform in bear phases. Although little is known about the tactical asset allocation model, it has fared reasonably well so far. The fund is suited for mature investors with a long-time horizon. The risk associated with active management is a concern but is true for all category peers. The higher equity exposure makes the fund relatively more volatile than some of its peers and should not be taken lightly. A TER of 0.6% is reasonably inviting.
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