Mahindra Manulife’s new multi asset allocation fund has forsaken equity taxation in order to provide investors a genuine multi asset product that has enough latitude to participate meaningfully in all 3 asset classes – equity, debt and precious metals – as justified from time to time by market conditions. Opting for equity taxation effectively means the fund will look like a BAF with a token 10-12% allocation to gold.
With LTCG available for 3 yr+ holdings, Rahul says it not only promotes patience in the investor, but also allows fund managers to harness market cycles and asset class cycles better. Equity allocations can range from 35-80%, debt from 10-55% and precious metals from 10-30%.
The fund will look at bond yields and earnings yields to geta sense on calibrating equity allocations. For the initial portfolio, expect equity to range between 50-60%, expect debt to be around 30% and precious metals around 12-13%.
Gold does best when real yields are at or near zero. We are not there yet – so initial precious metals exposure will likely be 12-13%, with silver being part of the mix.
Equity component will resemble a flexicap strategy. The debt component will be managed in two parts: the minimum 10-15% allocation will go into good quality 3-5 yr PSU bonds to capture healthy accruals while the remaining variable portion will be invested initially in 5 yr duration G-Secs.