HSBC MF’s new multi asset allocation fund will preserve equity fund taxation (>65% equity) but will have an effective net equity range of 45%-80% (with arbitrage making good any shortfalls). With market valuations now around 1 SD above mean, net equity range will be 55-65%. Levels of 45% and 80% will typically come into play when market valuations are 2 SD above and below mean respectively.
Cheenu says with very few pockets of attractive valuation available in the markets now, it is reasonable to expect either a price or a time or both corrections – which she says will be healthy for the long term trajectory of the market, given the robust long term outlook for the economy.
The equity portfolio will be managed in a flexicap style. Initial portfolio may see a skew towards large caps as valuations are relatively better in this space. However, growth stories in the mid and small caps spaces will be keenly tracked and added at reasonable valuations.
Fixed income allocations will be deployed in a mix of 5-6 yr corporate bonds to take advantage of attractive spreads and in long duration G-Secs to take advantage of likely fall in yields when the rate cut cycle commences.
CY24 will see the debt component playing more aggressively for alpha given the favourable market conditions. However, from a longer term perspective, expect equity to deliver the largest slice of alpha with debt bringing in stability in the portfolio.