Balanced advantage funds: BAFs vs static 50:50 portfolio

To find out whether the dynamic allocation adds any value for investors, we compared BAFs with a 50:50 portfolio of equity (flexi-cap funds) and debt (short-duration funds), with the portfolio rebalanced at the start of every year. Flexi-cap equity funds and short-duration debt funds should be part of an investor's core portfolio and are therefore suitable for this comparison. We compared the performance during different phases of the market, along with one-year rolling returns in the past three-four years of their existence. Though it is a limited timeframe, the results suggest that dynamically altering the equity exposure does not offer any significant advantage. In most cases, a 50:50 allocation would have done just as well or even better than a BAF (see table 'BAFs vs static 50:50 portfolio'). We examined the quantum of underperformance or outperformance of individual funds as against the 50:50 portfolio. Funds with median net equity of up to 40 per cent captured the downsid