Avoid exiting Balanced Advantage Funds based on short-term underperformance

Balanced Advantage Funds have had a weak year, but advisors warn against knee-jerk exits, saying investors should stay invested unless a fund persistently lags peers and benchmarks

Balanced Advantage Funds (BAFs), also called dynamic asset allocation funds, have underperformed over the past year. This category, with 41 funds and assets under management worth ~Rs 3.18 trillion, has delivered a meagre 4.3 per cent average return. Investors should not react hastily since the current weak phase may prove temporary.

 

Why have BAF models struggled this year?

 

Many BAFs struggled to adjust net equity levels amid sharp swings in valuation. “Several funds either maintained very low equity exposure during strong market phases or kept net equity too high when markets corrected. Hence, with a few exceptions, most BAFs could