DSP Black Rock Mutual Fund has launched New Fund Offer (NFO) of DSP BlackRock Dynamic Asset Allocation Fund (Scheme), an open ended fund of funds Scheme. The NFO is open for subscription from Jan 17, 2014 and will close on Jan 31, 2014. Exit load will be applicable as 1% of NAV, for holding period <=1 year; 0.5% of NAV, for holding period greater than 1 year till 2 years; and zero, thereafter. The minimum subscription amount is Rs 5000.
What is the DSP BlackRock Dynamic Asset Allocation Fund?
It is a first of its kind Fund-of-Funds mutual fund scheme that offer clients asset allocation solution. The scheme endeavours to dynamically change the asset allocation based on the relative attractiveness between equity and fixed income. This Scheme would invest in existing equity and fixed income schemes of DSP BlackRock Mutual Fund.
Why is asset allocation important?
- Trying to time the market is difficult for regular investors: Investors inevitably end up making unsuitable decisions
- Understanding that any one asset class cannot be relied upon exclusively to provide consistent returns is critical
- The right balance of equities and fixed income in investor portfolios is what matters the most
- Asset allocation is an investor’s best friend: It balances risks vs potential rewards for an investor by adjusting the equity Fixed Income ratio in a portfolio according to the current market conditions.
Why should an investor consider this Scheme?
Solution focused - Seeks to offer a bundled investment proposition
Active approach - Achieves tactical asset allocation based on the relative attractiveness of equity and debt markets
In-built risk management - Automatic rebalancing of portfolios to not only aim for better returns but also to limit downside for investors during market downturns.
Simple & holistic - Uses the simple yield gap metric to assess market valuations
All weather fund - Suitable for Investors looking at long term wealth creation, irrespective of market conditions.
This Scheme is suitable for investors who are seeking*
- Long-term capital growth
- Investments in units of one or more equity mutual funds and debt mutual funds of DSP BlackRock Mutual Fund
- High Risk (Brown)
*Investors should consult their financial advisors if in doubt about whether the Scheme is suitable for them. Note: Risk may be represented as: (Blue): Investors understand that their principal will be at low risk. (Yellow): Investors understand that their principal will be at medium risk. (Brown): Investors understand that their principal will be at high risk.
The scheme's performance will be benchmarked against Crisil Balanced Fund Index and its fund managers are Apoorva Shah and Dhawal Dalal.
The Scheme seeks to generate income and / or capital appreciation by investing the appropriate asset allocation ratio between equity and debt by comparing the relative merits of investing in either asset class by considering the 'Yield Gap' ratio. Yield gap is defined as the ratio of 10-years Government Securities Yield (as a measure of long term interest rates) to the Nifty earnings Yield (as a measure of returns in equity markets). The scheme seeks to rebalance the portfolio based on relative returns of these two measures. The model also considers the modified yield gap, which uses 1Y G-Sec yield in the numerator.
Based on the back-testing exercise done by DSP BlackRock mutual Fund it is found that an asset portfolio constructed on the yield gap model, generates holistic returns, over a long term period (over 10 years ending on December 2013) compared to the equity market benchmark (Nifty).
This Scheme offers an active asset management approach and adjusts the asset allocation to changed market conditions.
Investment Objective: The investment objective of DSP BlackRock Dynamic Asset Allocation Fund (Scheme) is to seek capital appreciation by managing the asset allocation between specified equity mutual funds schemes and debt mutual funds schemes of DSP BlackRock Mutual Fund. The Scheme will dynamically manage the asset allocation between the specified equity mutual funds schemes and debt mutual funds schemes of DSP BlackRock Mutual Fund based on the relative valuation of equity and debt markets. The Scheme may also invest a certain portion of its corpus in money market securities and/ or money market/liquid schemes of DSP BlackRock Mutual Fund, in order to meet liquidity requirements from time to time. However, there is no assurance that the investment objective of the Scheme will be realized.
Asset Allocation: Units of DSP BlackRock Equity Fund and/or DSP BlackRock Top 100 Equity Fund and/or other specified schemes of DSP BlackRock Mutual Fund: 10% - 90%, b) Units of DSP BlackRock Strategic Bond Fund and/or DSP BlackRock Short Term Fund and/or other specified schemes of DSP BlackRock Mutual Fund: 10%-90% and c) Money market securities and/or units of money market/liquid schemes of DSP BlackRock Mutual Fund: 0%-10%.
Investment Strategy: The asset allocation of the Scheme shall be based on the Yield Gap Ratio Model.
Exit load: Holding period from date of allotment : Less than or equal to one year: 1%; Greater than one year and less than or equal to two years: 0.5%; Greater than two years: Nil. The expenses of the Scheme will be over and above the expenses charged by the underlying schemes. Investors are advised to consult their own legal, tax and financial advisors to determine possible tax, legal and other financial implication or consequence of subscribing to the units of the Scheme. For complete details on risk factors, event of suspension of subscriptions and more details, investors are requested to read the Scheme Information Document (SID) of the Scheme. For risk factors and product labeling details of the Underlying Schemes, investors are requested to read the respective SIDs of the Underlying Schemes.
Mutual fund investments are subject to market risks, read all scheme related documents carefully.