HDFC vs ICICI: A tale of two fund houses and their BAFs
Mint Mumbai|February 08, 2024
Deciding which balanced advantage fund is better for you depends on your risk appetite
Anil Poste

In the complex world of mutual funds, where every decision holds potential financial implications, finding the right investment avenue can be challenging. Balanced advantage funds (BAFs) emerge as a relatively stable option, offering investors a balanced mix of equity and fixed income exposure that adapts to market dynamics. Today, we'll delve into BAFs through the lens of two big players-HDFC Balanced Advantage Fund (HDFC BAF) and ICICI Prudential Balanced Advantage Fund (ICICI PRU BAF).

What is a BAF?

A BAF, or a dynamic asset allocation fund, invests in both equity and debt, and rebalances between them periodically. The idea is to give you a less volatile experience than a pure equity fund. BAFs are generally taxed as equity (10% long-term capital gains, or LTCG, after 1 year) since they generally take a 65% equity exposure at the gross level. However, they typically use derivatives to hedge part of this exposure when the markets rise. "The dynamic asset allocation category is expected to be a go-to fund, an allweather fund for all kinds or investors," says Nirav Karkera, head of research at Fisdom, a wealth-tech platform.

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