Would you suggest investing in dynamic asset allocation funds or multi-asset allocation funds, as they leave the asset allocation job to fund managers?
- Ankit Malik
The straight answer to this question is no. My expectation from a fund manager is that he/she should manage the fund in a disciplined manner by incorporating adequate diversification. When I invest in a mutual fund, I look forward to convenience and discipline, but I don't look forward to any magic. I don't expect the fund manager to be heavily invested in equity at the right time and be invested in debt just before the market crashes. I think this is an impossible thing to do.
A fund manager who manages a balanced fund or an aggressive hybrid fund or an equity savings fund maintains the asset allocation at all times. He/she will not change the asset allocation of the fund randomly, whereas dynamic asset allocation funds just do the opposite thing. Fund managers of dynamic asset allocation funds can invest from 0-100 per cent in equity or debt based on their discretion. In the past 10-15 years of their existence, I don't think fund managers have been able to call the market success successfully.
I would like to invest in funds that manage their asset allocation in a disciplined manner. If a fund sells its equity and buys bonds when the equity allocation crosses a certain level, say 80 per cent of the portfolio, I would be happy to invest in such a fund because it is more predictable in its asset allocation. So, I would go for a predictable asset allocation methodology rather than a random asset allocation strategy followed by dynamic asset allocation funds.