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DSP BlackRock Investment Managers, an asset management company, launched the DSP BlackRock Dynamic Asset Allocation Fund, which will attempt to derive maximum returns by investing in 12 equity and debt funds managed by the fund house.

The open-ended fund will dynamically manage the asset allocation by investing in funds of DSP BlackRock Mutual Fund, which have a long-term performance track record.

The issue will be open for subscription from January 17 to January 31.

Automatic allocation

S. Naganath, President and CIO, DSP BlackRock Investment Managers, said while timing the market would be difficult even for a seasoned fund manager, common investors are puzzled by the market volatility.

“The dynamic fund resets asset allocation automatically and, therefore, seeks to eliminate confusion and hesitation about timing the market,” he said.

The dynamic fund would invest primarily in DSP BlackRock Top 100 Equity Fund and DSP BlackRock Equity Fund to get equity exposure and DSP BlackRock Strategic Bond Fund and DSP BlackRock Short Term Fund to get debt exposure.

Besides, it will also invest in DSP BlackRock Focus 25 Fund, DSP BlackRock Opportunities Fund, DSP BlackRock India TIGER Fund, DSP BlackRock Mutual Fund, DSP BlackRock Money Manager Fund, DSP BlackRock Banking and PSU Debt Fund and DSP BlackRock Income Opportunities Fund.

The automatic rebalancing of portfolios not only aims at achieving better returns but also seeks to limit the downside for investors during market falls, said Pankaj Sharma, Executive V-P (Head of Business Development and Risk Management), DSP BlackRock Investment Managers.

The scheme uses the yield gap ratio, which is the ratio of debt market yield to equity market yield, to assess market valuations. In essence, the scheme would be suitable for investors looking at long-term wealth creation, he said.

While the ten-year G-Sec yield is used as the proxy for debt market yield, the earnings yield of equity markets is simply the reciprocal of the Nifty price earning ratio. By evaluating the ratio of these two yields, one can assess whether equity markets are overpriced or under priced relative to debt markets.

(This article was published on January 15, 2014)
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