NFO Nippon India Multi asset Fund open till 21 August 2020

Different class of asset has its own risk reward generating ability. Asset which involve more risk like equity are generally create better returns as compare to asset class like debt, which involve lesser or moderate risk over a period of time. On the other hand, some asset class like Gold, appreciates when other assets class are in negative returns due to the some or the other factor in overall micro and macro economy. How about if a fund is managed with mix of all these three class of assets together? Thus, there are funds with Multi Assets allocations.

It is believed that weak or negative correlation between asset class helps portfolio diversification which in turn optimise the risk and rewards. Equity Debt and commodity all three are of different class of assets and they react differently in different market conditions and business cycles. Hence staying invested in different asset class is essential for long term wealth creation.

Multi assets Funds generates the long-term appreciation by investing across these different class of assets and aims to provide better risk adjusted returns with lower volatility.

Nippon India Multi Assets Fund (NIMAF), New Fund Offer from Nippon India Mutual Fund is one such type of funds which aims to provide benefits of assets diversification to investor through this single fund.

One needs to understand below factor before investing in NIMAF

What will be the asset allocation in by the scheme?

Under normal circumstances, the asset allocation will be as follows:

Table 1:  NIMAF‘s Asset Allocation

*Includes Gold ETF and Exchange Traded Commodity Derivatives (ETCDs) where participation will be limited to derivatives contracts in Metals, Energy and Indices as permitted by SEBI from time to time.

What will be the investments strategy of the scheme?

To achieve the investment objective, the Scheme will invest in equity & equity related instruments, debt & money market instruments and Gold ETF and Exchange Traded Commodity Derivatives (ETCDs) as permitted by SEBI from time to time.

Equity investment framework will be

Among the equity class the scheme seeks to invest 50% of Equity in domestic equities and 20% in oversees equities.

For investments in equity and equity related securities, the Scheme would identify companies for investment, based on the following criteria amongst others: a) Sound Management b) Good track record of the company c) Potential for future growth d) Industry economic scenario

Domestic equity investment framework will be 50-70% in large cap stock and rest predominantly in midcaps with an objective to generating reasonable alpha through stock selection

Whereas the overseas equity investment framework will be 65% weight to US, 20% to Japan & Europe including UK, and rest in Others. Fund would broadly keep the country exposures similar – especially to US and Europe. Fund would have approximately 25 stocks – 15 in US, 5 in Europe including UK and the rest in others.

Debt Investment Framework will be

For Investing in Debt and money market the fund will primarily focus on short term accrual-based instruments and allocation to high credit rating quality instruments

Commodity Investment framework will be

• Minimum 10% exposure to Gold through ETF or ETCD route. Fund may also invest in Sovereign Gold Bonds.
• 5% allocation to other commodities: Silver, Energy, Commodity Indices & other commodities through ETCDs as permitted by SEBI from time to time.
• In absence of any opportunities, Fund may follow arbitrage strategy in commodities.

Investment rationale of the NIMAF scheme are

• Fund seeks to provide diversification across asset classes with an aim to provide superior risk adjusted returns
• Fund also offers diversification under respective asset classes
• Benefit from Tax efficiency through rebalancing within the Fund
• A one stop solution which may help to reap benefit of Growth of Equity, Stability of Debt & Diversification from Commodities

Table 2: Details of Nippon India Multi Asset Fund (NIMAF)

Outlook

Since the assets are non-correlated with each other within the portfolio, the fund will mitigate the risk of loss due to any single asset class. The scheme has exposure to international market which will have the geopolitical risk involved at the same time the fund has very good investment opportunity in domestic equity market under the new normal post covid-19, where the Indian economy will have the growth potential among new reforms relating to Atmnirbhar Bharat. This will have the potential effect of value growth in its domestic equity portfolio which is major portion among other class of assets.

Thus, the fund manager will have the opportunities to invest in current low value market conditions to construct a strong fundamental portfolio in its equity segment of the scheme. Debt portfolio allocation will have moderate opportunity as the interest rates will be the key factor. Commodity again will be driven by the value of Gold amid increasing strain relations between indo-china and trade war tension of US and other nations with china.

Conclusion

Thus overall, your portfolio must have the multi asset funds scheme which will tend to reduce the volatility and provide stability to your overall asset class mix. You should have moderately high-risk appetite and long investment tenures of at least 3 to 5 years to have optimal return from the scheme. We are of the view that understanding the overall implications is important before investing.

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Contact us at admin@identityinvestments.in or M:9920657907 for more information on scheme information documents and Key Memorandum Information documents for investing in NFO.

Mutual Funds Investments are subject to market risk, please read all scheme related documents before investing