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Hello everyone and welcome to a brand new webinar brought to you by studyiq52.blog and this time around we are going to be speaking about a very interesting category the multi-asset allocation fund there is the launch by 361 of exactly this category of fund there's an NFO coming up and it's going to be open between the 30th of July to the 13th of August so let's understand a bit more about this category as well as this particular fund what kind of strategies will they be deploying and to talk about this. I have with me none other than the CEO of 361 AMC, Mr. Raa Ayangar. Thank you Raa for joining us. Indeed, a pleasure to hear from you and your pearls of wisdom with your uh plenty of experience in the mutual fund industry. So I think to begin with, let's just give all of our viewers a bit of an introduction uh into what exactly is a multiasset allocation fund in the first place. So thank you Mina and uh thank you Fesa for giving me this opportunity. Conversely, uh, multi-asset funds are very simply put various assets that you can put into a single sleeve, right? We've all heard of equity funds, fixed income funds, hybrid funds, which are a combination of two, which is equity and debt. For example, this combines various asset classes. So let's say in the 361 asset what we plan to invest in is obviously equity fixed income gold silver invited and we do have a provision to put some money into foreign equities also as and when the limits are available to the mutual fund industry. So as you can see it's a bit of a it's a it's a it's a all the investment classes that let's say you and I can put money to which you would normally put through three four five six different schemes typically works into one scheme here itself. So it's it's possibly the most uh it's it's the most diversified scheme today uh that the the regulator allows the mutual fund industry to do because there's very little that you can't do in a multiasset fund uh compared to say some of the other funds which are there in the market today. Okay. So um I'd like to understand what is the role that this kind of a fund would play in an investor's portfolio. Um I mean we're living in a world that's almost always fraught with all kinds of uncertainties. If it's not A, it's B, it's C. There's always something or the other that troubles an investor's mind. Um I'd like to know what role does it play and also why launch such a fund right now? No. So I think you rightly put it. The world is very very complicated. So tocomplicate it further, we've uh there is an acronym called VUA. I'm sure you've heard about it, but I'll just let me explain it. Buka is nothing but volatility, uncertaintity, complexity and ambiguity, right? It's typically a management word which is used a lot in the corporate world because that's the corporate environment. But in financial services especially seeing what's happening around us within us, you know, there are at this point of time so many conflicts in the world. Interest rates are all over the place. Uh demand supply situations are not very clear. There is shortage of certain things. There surplus of certain things. Now these in this environment I think what is required is the flexibility and the option to be able to do various assets uh in real time and that's where a multiasset fund plays an important role. Now the beauty of multiasset funds is that these are assets which are not typically don't go up and down at the same time. So in the past if you know if
.jpeg "361 AMC Multi Asset Allocation Fund NFO: Dates, Strategy, and Benefits Explained")
you will I mean basic stuff will tell you that equity and fixed income typically work apart from each other. So typically when equity doesn't do very well fixed income sort of provides a bit of a shock absorber. The same thing happens in gold and equity today. It's very very evident over the last 12 13 14 years if you see whenever equities have not done well whenever there is some stress in macro situation or when there is some uncertaintity there is a flight to safety and that and part of that safety is taking us to gold now silver is a very interesting asset class because it's now used in most new age technology whether it's renewables EV batteries anything that you think about which has got a recent phenomenon which are in the new manufacturing scheme of things silver is a very very important commodity to be used there. So silver and equity actually play some complimentary roles there. So as you can see mina this is a fund where your so the investor essentially wants uh obviously the best possible outcome with the lowest possible volatility right the challenge in equities is that that's very difficult to do because you will have periods where equities give you standout returns you will have periods where equity give you nothing and you know the last three years itself have given enough examples of that right and it's an extremely it reacts very very adversely to short-term news so many investors are uncomfortable with that level of volatility. They want some level of predictability. Having said that, they want it in a tax efficient manner because ultimately what you get in your hand is post tax return. There is a return on which you pay your tax. So ultimately what you get in hand is your post tax return. So if you can put all this together in a formula in a scheme and that gives you a great post tax return, I think that's really solving a very very essential investor need today. Okay. Um yeah, I think that's a very interesting points um that you have raised, you know, and what's I guess very interesting is that you have somebody who's doing that balancing of sorts for you between those different asset classes, you know. Um so let's talk um a bit more about the fund itself. Um because like you mentioned, literally when it comes to multi-asset funds, the world is your oyster. you literally can inve all kinds of different asset classes but let's talk about particularly your fund um could you tell us which are the asset classes you'll be focusing on the allocation percentage etc. Yeah. So I think we start the fundamental thesis of this fund is this is a low volatility fund. It's a defensive fund. So we want to try and provide a fixed income plus kind of an investment experience to you. Right? Uh so the debt allocation is between 25 and 50%. The commodity allocation is between 25 and 40%. The equity allocation is between 15 and 35%. And then we've got a sleeve which is 0 to 10% like I told you on invited which are real assets you know where you get some ability to buy some real estate uh also within this fund also as I said uh mum you can buy some offshore equities whenever we get whenever the whenever the regulator gives us the limits as in gives the industry limits we have a provision to put money in international equities but that will be part of the 15 and 35. Now how how all this works is that there are effectively three fund managers managing this portfolio right the equity gentleman is the person who runs our equity mutual funds he's may Patel he's been with us for a very very long time stellar track record Milan Modi is our head of fixed income he looks after our dynamic bond fund liquid fund overnight fund so the debt portion will be managed by him we have a third gentleman who's a commodity specialist he has over 15 years of experiencing in managing commodities specifically gold and silver and uh he's going to be doing that and of course we've got some ability like I said to do some reads and init which is separate which is going to be run by mill now to make sure all this works well we've got something called an asset allocation committee which is chaired by our CIO Anoop Meshwari so Anup is somebody who has more than three decades of experience in capital markets he's seen all cycles a lot of commodities he knows what works when he'll be obviously I will be the external representative there'll be our economist there'll be a couple of other research people inputs will keep coming. This committee will try and meet at least once in a month, look at the macro environment, look at what works well and then we'll decide the asset allocation at a total fund level. So let's say in the beginning, let's say if I were to get money today, what we plan to do today is put about 25 odd% into equities, about 35% into 35 to 40% into commodities and the balance into debt and 10% into REITs. That's the current thought process, right? And obviously this thought process will keep changing because the markets are not going to be fluid. Markets are fluid. Markets are ever changing, right? So we'll always keep uh making adjustments wherever required over here. So that's that's the broad investment structure. That's what we plan to do today. Within the commodity space, interestingly, I think we have seen more opportunities in silver than in gold. Uh so the current portfolio in my sense will be between 60 65% in silver. and maybe the remaining part and go that's the immediate thought process based on the data available to us. Of course in the next couple of weeks by the time we finish our no and something happens and you know every day is a new day in the market today you know that better than I do. So if something changes in the next 15 20 days obviously these allocations will change but the offer document very clearly gives the limits now we can't breach these limits under any circumstances. So that 15 to 35 25 to 40 in gold silver and 25 to 50 in debt those are and 0 to 10% in inst those are frozen in stone irrespective of our market view those are whatever allocations we do will be done around these limits only well I mean yeah markets change every day if markets um I mean that's really the nature of it but like we say you know if if you're going to be looking at the markets every five minutes maybe then mutual funds uh and especially you know equity oriented or maybe even a multiasset for that matter may not really be the right place for you um but let let's I mean you've given us a broad structure or the range at least of how money will be across these different pockets I'd like to understand from you that when you have money pulled into this ready-made portfolio of sorts how do different market conditions um cause these different asset classes to react act. Um for example, if let's say um there's something very untoward that happens tomorrow which really hits equity markets, how do the other asset classes come into play and you know balance um the risk out similarly vice versa if things are looking absolutely amazing or you know there's been a recovery of sorts what happens to equity. So I'd just like to understand the interaction be between these different asset classes. Well, that's a that's a super question because and that's the reason we selected this whole portfolio in the percentages that I talked about was largely because most of these asset classes are pretty much inverse to each other. So let's say like you rightly said when equity does well, gold doesn't do very well. That's statisticallyproven over the last 15 years. Equity and silver have a pretty positive they have a negative correlation, but they're better than gold and equity. Fixed income largely does as an interestbearing commodity but so typically does very reverse when compared to equity. So as you see uh most of my assets are actually being parked in the defensive space. Equity at best we can go up to 35%. The remaining 65% will be a combination of commodities plus debt plus init. Uh and these two don't work. These two are completely inverse to each other. So when when equity does really well uh the other assets will be stable to moderate return right but when equity does really badly for whatever reason you know let's take COVID for example which is a great period to think about lot of uncertainty in the world lots of worry about what's happening to the macro etc etc that was a period where actually commodities did reasonably well and fixed income also did very very well in that period of time so I think in that sense this product is very very evenly balanced the The whole purpose of this product mina is to try and make the returns as predictable as possible and hence reduce volatility as much as possible given the current market situation. Got it. Okay. Um so let's talk then about in the riskometer where does a fund like a multiasset allocation fund sit? That's that's a lovely question. It's not the highest risk like an equity fund but it's just a step higher than debt. So it's a high-risk fund because obviously nothing is certain in life right though obviously when you take that as a measure of risk there are certain elements in this fund which are uncertain right I don't know the price of gold for example two years from now I don't know the price of silver but given the construct of this fund this comes one level below the equity fund okay understood yeah because you have the other asset classes that sort of help a little bit so tell me are there any particular triggers I You have various of course experts who will be sitting and looking at this fund very closely. Are there any uh triggers or any uh factors and and movements that you will see around the globe that will make you guys react to changes in the funds composition? Um what do you guys look at when you decide that okay now is the time to go overweight on equities or okay now is the time to go underweight on equities so on and so forth. Could you share some of those examples with us? That's another lovely question. You see for us equity valuations a fundamental uh ratio that we look at is the price to book and typically when you look at it in the India context most of the times more than 80% of the times the index has largely been in a three to four times price to book right it's very rarely gone below three as in 2.5 those happens really in extreme crisis uh not in ordinary situations so maybe over the last 20 years maybe five or six times and these would be all really serious economic crisis like COVID or the global financial crisis of 2008 or the emerging market issues that we had the pigs issue in 2012 13 you know so those are very rare instances but typically right now for example where we are seeing valuations is actually past the four range anything over four mina makes the market a bit expensive and this is I'm talking large caps this is the PSC 100 I'm talking about so when I look at the midcap it's obviously a little more and small cap and midcap are pretty similar. So markets are in at elevated valuations. So at this valuation level we will obviously try and be moderate on equity. So as you know we've got a 15 to 35% range to be in the equity space. So my sense is I'm not the fund manager for this but I think the uh the allocations will be somewhere in the 20 to 25% range. uh having said that I think once that range is fixed we don't plan to put any more further curbs on the fund manager so it'll be an all cap portfolio where the fund manager is free to decide using our bottom up philosophy we call it the seddv framework which is essentially trying to identify companies which have a great ROI return on equity and also a great profit growth we call them secular companies we try and get as much of our investments in what we call the S category which is a secular category And then we move between defensives and cyclicals depending on the market at that point of time. So last year at this time the market was in a very cyclical range. Then slowly over the last 6 7 8 months it's moved to a defensive range. The last quadrant is of course what we call the V quadrant which is the value trap quadrant which don't fulfill an ROE paradigm and not even fulfill a profit paradigm. But having said that we don't completely shut it off. we reduce exposure there because I think those are where some of the best companies emerge in turnaround companies come out. So if you to see if you were to go and look at it five six years back you would find a lot of defense stock sitting in the value trap but over the last four five years because of whatever has happened uh various policies macro environment etc. Many of those companies are slowly trending upwards towards a secular bet. So the way at 361 we look at stock selection is really clearly bottom up. We are not really saying no to something or or yes to something and within that obviously in this fund obviously that's the 15 to35 segment. Now as far as commodities are concerned very clearly couple of things that we look at there's something called the gold silver ratio which is the price of gold to the price of silver and when right now it is actually favoring silver and then on top of that we overlay technical analysis and obviously more importantly fundamental analysis. So for us today, gold and silver both are showing great signs of demand and supply is very very muted. It's I don't think any new supply has come out in gold for a very very long time and given that central banks are buying excessively and retail customers are yet moving there and the world is a bit even today a bit erratic. We are yet in sort of unchartered territory on a lot of things. I think there is this flight to safety which is towards precious metals. So that will keep that equation alive very well. On the debt space very clearly we plan to follow a dynamic uh strategy which is on duration we can go really when interest rates are very very low or long-term rates are very low we can actually bring down the duration of the portfolio and maybe when things are in our favor and there's some possibility of capital gains we could take up the duration of the portfolio. This is essentially going to be a very a safety pot as I call it internally. uh this is essentially money that I'd like to keep and save away for a rainy day. As I said, it's a fixed income plus. So we don't plan to take any any serious investments into non-investment grade paper in this fund. So typically assets will be double A number and uh we already have a very very old dynamic bond fund existing in 361 which has given very very good stable returns of over 8% over the last five six years. So that's also a great benchmark to hold on invitina. going to be very very tactical. So wherever we see opportunities and where there is possibility of getting a decent singledigit return and some capital appreciation, we like to look at it from that perspective. We run a large internal portfolio in some of our other businesses. So we have some expertise in looking and finding such assets. So as I said uh this is broadly the entire investment framework but as you can make out it's quite it's easy to talk but it's a little complicated to do which is why we've got three specialists looking at it and not one and then obviously headed in the asset allocation committee by the CIO Anup himself. So this is in some sense like an orchestra everybody has to play the right tune at the right time to make sure that the investor gets a great song. Yeah, like they say, I mean, you know, the best conductors conduct an orchestra that eventually tunes out a beautiful rhythm. In this case, hopefully wealth creation opportunity for the investors. Um, and yeah, I understand, you know, I mean, there's always no fixed checklist. It's dynamic. You have to keep changing bases what the market um, you know, looks like and and I think that's what should be the ideal situation any which ways. Um speaking of benchmarks by the way um what are the since we are looking at multiple asset classes could you share with our viewers what should they.
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