Wealth Company MAAF’s approach to asset allocation will neither start from equity and treat others as residual, nor will it start from debt and treat precious metals and equity as residual.
The starting premise will be to give equal importance to all 3 asset classes and identify relative attractiveness to determine optimal asset allocation.
Equity will be at least 35% to qualify for LTCG @ 12.5% for 2 yr holding. Effective allocation range for equity will therefore be 35% -75%.
Allocations to precious metals and debt can be between10% to 50% and REITs can be upto 10%.
Gold for this fund is a strategy, not an afterthought. Gold in INR terms has delivered comparable returns to equity over 20-25 years with much lower volatility and it has negative correlation with Indian equity market, making it an excellent asset to hold – not just as a token allocation, but as a meaningful position.
The fund’s core strategic allocation will be around 40%in equity, 25-30% in debt and 25-30% in precious metals (gold and silver) and REITs. This will be altered at a tactical level at the margin in response to changing market conditions.
The initial portfolio may likely have 35-36% in equity, 4-5% in cash and the other asset classes will likely have be around their core strategic levels.
Equity segment will be large and midcap biased, in keeping with investor outcome expectations of lower volatility. Debt for the same reason will be more accrual based in short to medium term good quality papers rather than dynamic management of duration.