Mutual funds investors look to ‘balance’ funds as stock markets yo-yo

The recent volatality in the stock market gives the investor the benefits of growth of equity and relative stability of debt.

Balanced mutual funds are turning out to be the flavour of the season, thanks to the recent volatility in the stock markets.

Balanced funds invest money in a mix of equity and debt, with the fund manager deciding in which and how much, based on market conditions. This gets an investor the benefits of growth of equity and relative stability of debt, meaning lower risk for him in times of stock market volatility.

Balanced funds saw net inflows of 26,444 crore during January-April this year, against net outflows of 5,261 crore, according to the Association of Mutual Funds of India.

Manish Gunwani, senior fund manager, ICICI Prudential Asset Management Company said,“We have witnessed bouts of volatility this year and therefore, have been recommending balanced advantage or dynamic asset allocation funds to benefit out of volatility.”

According to fund managers, 25-30% of this year’s total inflows to balanced funds have come from new investors, while the remaining are from existing investors and from those who switched to them from other fund categories.

“There has been a renewed attraction that has come for arbitrage funds and balanced funds,” said A Balasubramanian, CEO of Birla Sun Life AMC.

The maturing of Fixed Maturity Plans (FMP) also helps fund inflows. “When FMPs mature, funds are not deployed back. FMP rates are low, and investments should be for three years (for tax benefits), so I would rather commit that money in hybrid funds,” he added.