Aditya Birla Sun Life Advantage Fund is an open-ended multi cap equity fund managed by Aditya Birla Sun Life Mutual Fund. As with most equity investments, this scheme is designed to deliver high levels of capital appreciation, which is its primary target, while it also features income generation as a secondary objective for investors. More importantly, the fund aims to achieve these key objectives while simultaneously maintaining low levels of risk for the investor.
About Multi Cap Equity Funds
Multi cap equity funds are best defined as equity funds that invest in market equities and various equity-derivatives in a manner that is independent of all market cap considerations. Thus, this type of equity mutual fund is better equipped to handle stock market volatility as on the one hand, large cap investments are ideally suited to preserve investment value during bearish markets, while mid and small cap investments provide superior capital appreciation during bullish markets. Apart from equities and equity derivatives, multi cap equity funds are also allowed to invest a small portion of their portfolio in debt as well as money market investments in order to further diversify their investments.
Aditya Birla Sun Life Advantage Fund Investment Objective
This multi cap mutual fund scheme features the stated objective of providing long-term capital appreciation of the investor’s investment while simultaneously ensuring lower levels of risk to the investment. To achieve this objective, the fund invests in a diversified portfolio comprising various equities and equity-derivatives. As the selection of securities will be crucial for the overall success of the scheme so that it achieves its stated objective, this mutual fund scheme would focus on identifying organizations that have high future growth potential as well as a proven management track record.
Risk Level of the Aditya Birla Sun Life Advantage Fund
The ABSL Advantage Fund is an equity scheme hence investments made into the scheme feature key investment risks including loss of the principal amount invested. Having been named as the “advantage fund”, this scheme is expected to focus on investing in up and coming companies that are capable of delivering high levels of growth in the future. Some of the key risks associated with investing in a scheme such as ADBSL Advantage Fund include but are not limited to – market risk, liquidity risk and underperformance risk. As a result even after application of relevant risk mitigation strategies, the Aditya BSL Advantage Fund is classified as a moderately high risk investment with potentially high returns for those staying invested for the long term.
Risk Mitigation Strategies of Aditya Birla Sun Life Advantage Fund
In order to make the investing in the scheme more attractive for investors, the fund management implements a number of key strategies so as to mitigate the level of risk that is inherent to the scheme’s equity investments.
Market Risk Mitigation: Market risk often termed as volatility risk occurs due to fact that the mutual fund is invested in company securities such as equity stock as well as equity derivatives. Being linked to share market performance, the value of these investments is liable to change during active trading. As the value of these investments increase or decrease, the overall value of the scheme’s portfolio will also rise of fall. As a general rule, larger and more established companies that are featured in the large cap segment are less prone to such market risk but tend to offer relatively lower returns. On the other hand mid and small-cap potential have near unlimited growth potential but are more prone to market-risk related to volatility. In order to balance this risk-return relationship, the Aditya BSL Advantage Fund invests in equities of various market capitalizations (multi-cap approach) in order to mitigate the overall market risk to the portfolio.
Liquidity Risk: During sustained market bear runs, the value of equity investments tends to decline substantially which often causes many fund investors to panic and request redemption of their scheme units. Unfortunately, equity investments are for the most part illiquid; hence, it is usually not possible for the scheme to sell existing equity investments at a profit in such a situation, which leads to a liquidity crunch for the scheme. The mitigation of this risk is mainly obtained through the investment of a minor portion of the fund’s portfolio into debt as well as money market investments, which ensure a higher level of liquidity for the scheme as a whole.
Underperformance Risk: The Aditya BSL Advantage Fund seeks to invest in companies that have high potential for future growth. However, the success of these companies is never guaranteed. Therein lies the risk of underperformance that is inherent to all equity investments. In case these equity investments are made in the securities of a company that does not perform as expected, the scheme’s performance as a whole will suffer. In order to mitigate this underperformance risk, the scheme tends to choose only companies that have sound management track records and are part of a sector capable of delivering a high degree of growth in the future.
Tax Considerations for investments in the Aditya Birla Sun Life Advantage Fund
With respect to taxation regulations, the Aditya Birla Sun Life Advantage Fund is designated as a multi cap equity fund hence the short term and long term capital gains taxation rules with respect to equity investments will apply. An investment made into this equity fund is designated as a short term investment in case the scheme units have been held for less than and up to a year from the date of unit allotment. For scheme units held beyond the 1 year period, the investment is classified as a long term investment. At present, short term capital gains i.e. profits generated from short term investment in equity schemes are subject to a 15% tax on the profits earned. As per existing rules long term capital gains obtained from redemption of equity investments such as Aditya Birla Sun Life Advantage Fund units are completely tax free. The dividends that may be declared from time to time by the scheme are completely tax free in the hands of the investor.
Key Features and Statistics of Aditya Birla Sun Life Advantage Fund
Inception: The Aditya BSL Advantage Fund was made available to individual mutual fund investors as an open-ended equity scheme for the first time in February 1995.
Entry Load: SEBI, the securities watchdog sent out a circular to all mutual fund houses in India that abolished entry loads for all mutual fund schemes. As a result, the entry load for new investments made into the ABSL Advantage Fund is currently zero.
Exit Load: As per existing rules, the exit load for this multi cap equity scheme is fixed at 1% of the total value of the units redeemed. However, this exit load applies only if the investor redeems his/her investment in the scheme prior to completion of 365 days from the date on which the scheme units were allocated. For units held beyond the 365 day period, the exit load payable by the investor is zero.
Minimum Investment Amounts: The minimum lump sum investment required for a new investor entering in the scheme is currently fixed at Rs. 1000 and higher amounts are allowed in addition to this minimum amount in multiples of Re.1. In case you have an existing investment in the scheme, you can add to your investment as long as the minimum amount of such additional investment is Rs. 1000. For those seeking to invest in the scheme via the SIP route, the minimum individual investment amount for SIP is Rs. 1000 and the minimum number of installments required for a SIP in this scheme is fixed at 6 installments.
Fund Manager: Mr. Satyabrata Mohanty has been managing the scheme since October 2011. He is an industry veteran with more than 12 years’ experience in key areas of the financial sector including financial research. Mr. Mohanty’s key areas of expertise include credit research, trading as well as equity and debt fund management. He has been working with various Aditya Birla Group companies for over 17 years and prior to joining Birla Sun Life AMC he was working with Aditya Birla Management Corporation Ltd. He is a B.Com Honors graduate and a certified CFA.
Plans and Options for Aditya Birla Sun Life Advantage Fund
Direct Plan: In case you decide to invest directly through Aditya Birla Sun Life Mutual Fund AMC or one of their representative offices, you can opt for the direct plan of the scheme. If you invest in the Aditya Birla Sun Life Advantage Fund direct plan, you will be paying a slightly higher NAV as compared to the regular plan and also get the benefit of a lower expense ratio. As a result, you can look forward to marginally higher returns as compared to the Aditya Birla Sun Life Advantage Fund regular plan.
Regular Plan: The Aditya Birla Sun Life Advantage Fund regular plan is available to investors who are either investing directly through the fund house or making their mutual fund investments through a brokerage or other 3rd party securities market intermediary. This variant of the scheme features a slightly lower NAV as well as a higher expense ratio as compared to the direct plan of the scheme. The main reason to opt for the regular plan is the easy availability of this investment option.
Growth Option: Available through the Aditya Birla Sun Life Advantage Fund direct plan as well as the regular plan, the growth option of the scheme has just one objective – provide capital appreciation to the investor. No dividend payouts are received by the investor while he/she stays invested with this variant of the fund. However, when the investments made by the fund are profitable, such profits are invested back into the scheme, which increases the overall value of the scheme as well as individual unit NAV for the fund.
Dividend Option: In case you are the type of investor who likes the idea of periodic payouts in the form of dividends, then the dividend option is ideal for you. Available in case of both regular and direct plans, the dividend option of Aditya BSL Advantage Fund features 2 sub-types – dividend payout and dividend re-invest. In both cases, when a dividend is paid out, the NAV of each fund unit drops by an amount equal to the dividend declared. The dividend option is therefore ideal for those seeking payouts or income from their investment with capital gains being a secondary consideration.
Top Equity Holdings of Aditya Birla Sun Life Advantage Fund
The following are some of the notable equity, debt and money market investments made by Aditya Birla Sun Life Advantage Fund.*
|Automotive||Hero Motorcorp, TVS Motor, Maruti Suzuki, Eicher Motors, Motherson Sumi, MRF, etc.|
|Banking and Financial Services||HDFC Bank, ICICI Bank, IndusInd Bank, Kotak Mahindra Bank, Yes Bank, Bank of Baroda, State Bank of India, Equitas Holdings, Housing Development and Finance Corporation, PNB Housing Finance, Repco Home Finance, Bajaj Finserv, L&T Finance, Bajaj Finance, Cholamandalam, etc.|
|Cement and Construction||Ambuja Cements, Dalmia Bharat, Orient Cement, Ramco Cements, etc.|
|Chemicals and Pharmaceuticals||UPL, Asian Paints, Berger Paints, Bayer CropScience, Eris Life, Natco Pharma, etc.|
|Consumer Durables and non-Durables||Blue Star, Emami, Hindustan Unilever Limited, etc.|
|Engineering and Capital Goods||BEML, Engineers India, Larsen etc.|
|Manufacturing||Bharat Electronics, Max Financial, KPR Mill, etc.|
|Metals & Mining||Hindalco, Hindustan Zinc, Vedanta, etc.|
|Oil & Gas||Indraprastha Gas Limited, Petronet LNG, Hindustan Petroleum Corporation Limited, Mahanagar Gas, etc.|
|Miscellaneous||Century, Voltas, Brittannia, Zee Entertainment, V-Guard Industries, Titan Company, DLF, SpiceJet, Tata Communications, Dharti Dredging, etc.|
|Cash/Call and Others||Clearing Corporation of India Limited, Margin (Future and Options), cash and bank, etc.|
*The equity, debt and money market investments in the above list are illustrative and liable to periodic change based as per the fund management’s decisions.
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