ABHISHEK KUMAR Mumbai, 19 May he net equity exposure of most large ☐ balanced advantage funds (BAFS) has decreased in the past few months, with two of the largest schemes in this category offered by ICICI Prudential Mutual Fund (MF) and SBI MF lowering allocations below 40 per cent.
The average equity exposure of the five largest schemes stood at 53.4 per cent at the beginning of the calendar year 2024 (CY24). It decreased to 51 per cent by the end of April 2024, according to portfolio disclosures.
BAFS manage equity and debt allocation dynamically, depending on underlying valuations. Although regulations provide complete flexibility to such schemes regarding allocations, they typically opt for a minimum 65 per cent equity exposure to benefit from the equity tax treatment, which is advantageous compared to debt.
However, BAFS use equity derivatives to reduce their net exposure to below 65 per cent while complying with the taxation requirement at the gross level.
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