Axis Dynamic Equity Fund is an open-ended equity fund primarily focused on capital appreciation and aims to manage risk through an active asset allocation in equity and debt securities.
Summary
| Type |
An Open ended equity Scheme |
Benchmark Index |
Crisil Balanced Fund Index |
| Min. investment: |
- Rs.5, 000/- & in multiples of Re. 1 thereafter
- Additional purchase: Rs 100 and in multiples of Re 1 thereafter |
Plans:
Options: |
- Growth*
- Dividend
- Dividend Payout
- Dividend Reinvestment
*default option |
| Face Value |
Rs 10 per unit |
Expense Ratio: |
Maximum total expense ratio (TER): Upto 2.50%*
Addl. expenses under regulation 52(6A)(c): Upto 0.20%
Additional expenses for gross new inflows from specified cities: Upto 0.30% |
| Entry Load |
Nil |
Exit Load: |
1% if redeemed / switched - out within 12 months from the date of allotment |
| Issue Opens |
July 11, 2017 |
Issue Closes |
July 25, 2017 |
The Direct Plan shall have a lower expense ratio excluding distribution expenses, commission, etc., and no commission shall be paid from such plan.
Investment Objective*
The investment objective of the scheme is "generate capital appreciation by investing in a portfolio of equity or equity linked securities while secondary objective is to generate income through investments in debt and money market instruments. It also aims to manage risk through active asset allocation."
*Source: Scheme Information Document
Is this fund for you?
The Axis Dynamic Equity Fund (ADEF) has a dual objective of providing capital appreciation and income distribution to the investors by using equity and equity related instruments, arbitrage opportunities, and investments in debt and money market instruments.
The scheme seeks to make the best from the ever-evolving market conditions. The fund consciously seeks to manage market risk by systematically tweaking its exposure to the different asset classes.
The aim of this fund is to minimise the risk and optimise risk-adjusted returns through active portfolio diversification. The fund is mandated to invest across various asset classes like equity, fixed income & arbitrage which have been historically uncorrelated with each other.
How will the fund allocate its assets?
Under normal circumstances, the asset allocation pattern followed by the fund will be as under:
| Instruments |
Indicative allocations
(% of total assets) |
Risk Profile
High/Medium/Low |
| Minimum |
Maximum |
| Equity and equity related instruments* |
65 |
100 |
High |
| Equity Derivatives |
0 |
45 |
High |
| Debt and Money Market Instruments including cash & cash equivalent* |
0 |
35 |
Low to Medium |
| Units issued by REITs & InvITs |
0 |
10 |
Medium to High |
(*Source: Scheme Information Document)
**Provided a minimum of 80% will be invested in large cap companies. # Investment in Securitized debt, if undertaken, would not exceed 20% of the net assets of the Scheme.
Further it is stated in the offer document that:
- The Scheme shall not engage in securities borrowing and short selling activities. The Scheme shall not invest in foreign securitized debt and Credit Default Swaps.
- The Scheme may undertake repo transactions in corporate debt securities in accordance with the directions issued by RBI and SEBI from time to time. Such investment shall be made subject to the guidelines which may be prescribed by the Board of Directors of the Asset Management Company and Trustee Company.
- The gross equity exposure will be maintained between 65% to 100% while the net equity exposure is to be maintained between 30% to 100%. The difference between these exposure will be carried out using derivatives.
- The cumulative gross exposure through equity, debt and derivative positions shall not exceed 100% of the net assets of the scheme.
What investment strategies will the fund follow?
Being an open-ended dynamic equity fund, ADEF has a dual objective of generating capital appreciation by investing in equity and equity related securities as well as generating income by investing in debt and money market securities, while attempting to manage risk from the market through active asset allocation.
For equity allocation:
The Axis Dynamic Equity Fund (ADEF) will follow an active fund management strategy. The gross equity exposure will be maintained between 65% to 100% while the net equity exposure is to be maintained between 30% to 100%.
Furthermore, the AMC has built a proprietary in-house quantitative model to determine the top-down dynamic asset allocation for the fund. The quantitative approach looks at equity markets across three parameters – trend, volatility and valuations – to decide the appropriate allocation to the same. This model will run on a 40 trading-day basis and all the parameters are considered for finalizing the equity allocation. Once the allocation is fixed, it won't change for 40- trading days until the model is run again.
Specifics of the model
- Valuation is represented by the trailing PE of Nifty 50
- Volatility is represented by the 30 day standard deviation of Nifty 50
Hi : >17%
Low: <= 17%
- Trend is represented by 2 variables – i) difference between the 90 day and 15 day moving average of the Nifty 50, and ii) rate of change of the 90 day moving average of the Nifty 50
Assume: R = rate of change of the 90 day moving average
15DMA = 15 day moving average of the Nifty 50
90DMA = 90 day moving average of the Nifty 50
Hi : 15DMA > 90DMA and R > 0%
Mid : 15DMA > 90DMA and R <= 0% OR 15DMA <= 90DMA and R >1%
Low : 15DMA <= 90DMA and R <= 1%
Equity Allocations recommended by the model
(Source: Scheme Information Document)
On back testing the model between June 1999 and March 2017, it showed a 4% p.a. outperformance over the Nifty 50. The model performance was calculated using Nifty 50 Index for equity and CRISIL Short Term Bond Fund Index for debt. However, the actual performance of the scheme will depend on the portfolio construction and expenses.
(Source:Axis Mutual Fund)
Further, the focus would be to build a diversified portfolio of strong growth companies, reflecting our most attractive investment ideas, at all points of time. The portfolio will be built utilizing a bottom-up stock selection process, focusing on appreciation potential of individual stocks from a fundamental perspective. The universe of stocks is carefully selected to include companies having a robust business models and enjoying sustainable competitive advantages as compared to their competitors. The fund will not have any market capitalization bias. The fund will adopt a holistic risk management strategy in order to manage equity market risks.
Equity Derivatives
The scheme will not hesitate in using derivatives and fixed income securities including money market instruments that will be in the range of 0% to 35%. The scheme will vary its investment in equity and equity related instruments depending upon the quantitative model.
The fund would look for market opportunities between the spot and the futures market. The cash futures arbitrage strategy can be employed when the price of the futures exceeds the price of the underlying stock.
For debt allocation:
The exposure to debt & money market instruments including cash & cash equivalent will be maintained between 0% to 35%. On short term spectrum, the fund aims to invest in fixed income market to maintain liquidity.
The allocation to debt is the residual number that is arrived at after deciding the equity allocation. The asset allocation decision is reviewed on an ongoing basis and is dynamically linked to movements in market variables.
Fund Manager Profile
The fund will be jointly managed by Mr Anup Tiwari, Mr Ashwin Patni and Mr R. Shivakumar
Mr. Anupam Tiwari is Fund Manager, Axis Asset Management Company Ltd. since September 2016. He is a Chartered Accountant and has around 17 years of experience in the industry. Prior to joining Axis Mutual Fund, Mr Tiwari was associated with Principal PNB Asset Management Company Pvt. Ltd., Reliance Life Insurance Ltd. and Reliance Capital Asset Management Company Ltd.
Mr. Ashwin Patni is a fund manager with Axis Mutual fund since last five years. He is a BE (Metallurgy) and is a Post Graduate Diploma in Management. He has overall 14 years of experience in the industry. Prior to joining Axis Asset Management, Mr. Patni was a portfolio manager with IDFC AMC. Prior to that he was a Product Manager at standard Chartered Bank and Manager – Syndication at ICICI Bank.
Mr. R. Sivakumar is joint fund manager of this fund. He holds Bachelor of Technology from IIT(Madras) and is a Post Graduate from IIM (Ahmedabad). He has rich industry experience of around 18 years. Prior to joining Axis AMC, he has held the position of a Chief Operating Officer at Fortis Investment Management (India) Pvt. Ltd. - previously known as ABN AMRO Asset Management (India) Pvt. Ltd. His previous roles included Fund Manager – Fixed Income, VP – Product Development and Portfolio Management and Head – Structured Products.
Fund Outlook
Looking at the current market scenario, dynamic funds can help in controlling the downside risk. In case of ADEF, the fund's investment objective suggests that it will invest predominantly in equity and equity related instruments. It also aims to capture opportunities available in the derivatives market. Also, the fund manager has the flexibility to invest in debt and money market instruments with the change in market conditions.
Given the current investment climate, the outlook of the fund will depend on the fund manager's ability to dynamically allocate its assets with the changing market condition. However, 65% of its net assets will be exposed to equity at all times, including the arbitrage component. The fund may lag during the bull run when compared to equity funds, it will still be in a good position to keep a check on its downside.
Since the fund is mandated to invest across asset classes the return potential of the fund may also be on the lower side as compared to that of a pure equity fund while the losses would be lesser as well compared to a pure equity scheme. This would ensure lower risk while also generating lower returns. The goal of the fund would therefore be to generate higher returns on a risk adjusted basis as is mentioned in its scheme information document. Success of ADEF is contingent primarily upon market volatility and opportunities prevailing in the markets.
DISCLOSURE AS PER SECURITIES AND EXCHANGE BOARD OF INDIA (RESEARCH ANALYSTS) REGULATIONS, 2014
About the Company including business activity
Quantum Information Services Private Limited (QIS) was incorporated on December 19, 1989.
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Disciplinary history
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Details of associates
- Money Simplified Services Limited;
- PersonalFN Insurance Services India Limited ;
- Equitymaster Agora Research Private Limited;
- Common Sense Living Private Limited;
- Quantum Advisors Private Limited;
- Quantum Asset Management Company Private Limited;
- HelpYourNGO Private Limited;
- HelpYourNGO Foundation;
- Natural Streets for Performing Arts Foundation;
- Primary Real Estate Advisors Private Limited;
- Rahul Goel;
- I V Subramaniam.
Disclosure with regard to ownership and material conflicts of interest
- Neither QIS, it's Associates, Research Analyst or his/her relative have any financial interest in the subject Company, except QIS receives fees for providing research to Quantum Equity Fund of Fund (QEFoF) which is Fund of Fund scheme managed by QMF and our associates has financial interest in the subject company.
- Neither QIS, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one per cent or more securities of the subject Company, at the end of the month immediately preceding the date of publication of the research report.
- Neither QIS, it's Associates, Research Analyst or his/her relative has any other material conflict of interest at the time of publication of the research report except that QIS is, as per SEBI (Mutual Funds) Regulations 1996, an associate / group Company of Quantum Asset Management Company Private Limited and Trustees and Sponsor of Quantum Mutual Fund (QMF) and to that extent there may be conflict of interest while recommending any schemes of QMF. However any such recommendation or reference made is based on the standard evaluation and selection process, which applies uniformly for all Mutual Fund Schemes. The payment of commission (upfront /annualized & trail), if any, for any Schemes by QMF to QIS is also at arm's length and as per prevailing market practices.
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