Is it time to move out of Balanced Advantage Funds?

Financial planner: Babu Krishnamoorthy, chief sherpa, FinSherpa Investment Services, Chennai.Questions asked by investors:1. Why are hybrid schemes, especially Balanced Advantage Funds, falling so much?2. Are fund houses moving illiquid debt securities to hybrid schemes from debt schemes?3. Is there a possibility of hybrid funds also shutting like Franklin debt schemes?His advice to investors:Hybrid funds have been dealing with a dual-side pressure in terms of performance and also the pressure of huge redemptions. Because of the volatility in both equity and debt markets, hybrid fund performance has been bad. However, investors' complaint is mostly about how these schemes are managed. If investors expectations are in line with the strategy that the fund follows, they will not run away. Part of this problem was mis-selling of hybrid funds. When the Balanced Advantage Funds came to existence, many retired and conservative investors came in for regular dividends. Those dividends are not there anymore and now they are taxed as well. Eventually, investors are giving up on these schemes. Later, these schemes were pitched to be the best to beat volatility but now investors want safety and they can't get that too. On top of that, there is buzz that the illiquid securities are being moved to BAFs and other hybrid schemes. This is prompting many investors to redeem their investments in balanced advantage funds. There were some news stories as well about this. But we are not sure whether or how much of it is problematic. My suggestion is to take action on these schemes only if you are convinced that your investment strategy doesn't match the schemes. If you believed these schemes to give you regular dividends, you need to get out of them. If you thought they would not fall, you had the wrong expectation. My sense is if you have a seven-year investment horizon and you can understand the portfolio dynamics of BAFs and can choose good quality schemes, stay invested. If you feel, you don't understand this, take help from someone or do not invest.

from Economic Times https://ift.tt/3hftyXl