Asset allocator funds eg – ICICI Prudential Asset Allocator Fund (FOF) – seem to diversify between Equity debt and others based on the market conditions, and have an expert asset allocation for the investors. Here we discuss whether its good to invest in asset allocator funds. This would lead to a higher taxation (As these are taxed like debt products even though its equity. Apart from that there are many downsides of using these kind of FOFs.
Asset allocator funds: Are They Risky
Its costly and most likely will generate less return than index. Icici has its own Multi Asset fund which will do the same thing. You’re better off using that fund if auto rebalancing from fund manager is one of the criterias. Actually icici has two asset allocation funds – One that invests in etfs and the other one that invests in icici mutual funds. Both have an expense ratio of 0.07 ℅. Icici Pru Multi Asset Fund buys equity and debt directly and for gold buys it’s ETF. Higher ER but it’s transparent.
Understand what all an asset allocator fund manager can do basis market conditions. Historically equity has gone up. Only in sudden crashes : 92,99,07,20 could anyone with foresight have made tactical calls to switch from equity to debt and back to equity.
1. Experts view of market, and switching at an appropriate time (for eg currently icici asset allocation fund has less than 50 ℅ in equity). Timing in debt is also important as the interest rates move.
2. Avoid Switching costs.
3. Appropriate sector / fund churn based on outlook.
Many use Quantum Multi Asset Fund of Funds as a risky fixed deposit. The stated objective of the fund is to keep the volatility low and look for moderate returns. No other fund has such a stated objective as far as I am aware. Other multi asset funds that I looked at didn’t attract me much.
Which no one ever managed to do. Most of these so called active fund experts themselves are not able to meet benchmark index. What is so special about this ICICI asset allocation fund manager? If he leaves ICICI, another random fund manager will come in. God knows what sort of an expert he will be. But your funds are locked into this MF. Don’t clutter up your portfolio with various products. Get a few equity funds. Get a debt fund. When market is fearful, swp from debt to equity.