An open-ended balanced fund with the primary objective of building wealth and generating returns by investing in equities and fixed income securities.

Summary

Type	An Open-Ended Balanced Scheme.	Benchmark Index	CRISIL Balanced Fund Index
Min. investment: Initial application amount through SIP Additional purchase Amount/No. of Units for Redemption	Rs 5,000 and in multiples of Rs 1 thereafter 6 instalments of Rs 1000/- each and in multiples of Rs 1/- thereafter. Rs 1000 and in multiples of Re 1 thereafter Rs 1,000/- or 100 Units or the account balance, whichever is lower.	Plans: Each Plan under the scheme offers a choice of three options which are as follow:	Direct; and Regular   Growth option Dividend option Bonus option
Face Value	Rs 10 per unit	Expense Ratio:	Upto 2.50%*
Entry Load	Nil	Exit Load:	For exit within 18 months from the date of allotment – 1 % For exit after 18 months from the date of allotment – NIL
Issue Opens	March 12, 2015	Issue Closes:	March 26, 2015

*The Direct Plan under the Scheme shall have a lower expense ratio as compared to the Regular Plan, excluding the distribution expenses, commission, etc. related to distributors. The Direct Plan shall also have separate NAV.  

Investment Objective*

The investment objective of the scheme is to generate long term capital appreciation and current income from a portfolio that is invested in equity and equity related securities as well as in fixed income securities.

*Source: Scheme Information Document

 

Is this fund for you?

JP Morgan India Balanced Fund is a balanced fund from the stable of JP Morgan Mutual Fund that aims to invest in debt and equity. The equity investments will be made with a long term view in mind and the fund will follow a flexible style of investing. Majority of the assets will be held in equities although that could vary depending on the fund manager’s perception of market conditions. A minor portion of the fund’s assets will also be deployed in arbitrage investment strategies. The fund would be ideally suited for moderate risk seeking investors. The fund has been launched at a time when Indian equity markets are overvalued and Indian bonds have already seen a sharp rally. Although the fund aims to spread investments in debt and equity depending on the market conditions, finding lucrative opportunities may not be an easy task for the fund.

 

Portfolio Strategy

Asset allocation between equity and debt is a critical function in this fund. For the equity portion of the scheme the fund manager will invest into opportunities available across the market capitalisation. The fund manager will use top down approach to identify growth sectors and bottom up approach to identify individual stocks. The portfolio will be adequately diversified and would seek to invest in companies with a long term view. The fund will also consider various equity arbitrage strategies to generate returns.

The types of companies that may fall within the scope of such investment could include but are not limited to:

• companies with strong growth potential;
   
• companies with a special product which has a particular market niche and therefore good earnings potential;
   
• companies undertaking corporate restructuring.
   

For the debt portion the strategy would be to allocate the assets of the Scheme between various money market and fixed income Securities with the objective of providing liquidity and achieving optimal returns.

The investment team of the AMC will carry out rigorous in depth credit evaluation of the Money Market Instruments and Debt Securities proposed to be invested in. The credit evaluation includes a study of the operating environment of the issuer, the past track record as well as the future prospects of the issuer and the short term / long term financial health of the issuer.

The actual percentage of investment in various Money Market and other fixed income Securities will be decided after considering the economic environment including interest rates and inflation, the performance of the corporate sector and general liquidity and other considerations in the economy and markets.

The fund will, in general invest a significant part of its corpus in equities and; the balance amount of the fund may be invested in debt and money market instruments. Also whenever good investment opportunities are not available, or the equity market is not likely to perform in the view of the Fund manager the Fund will reduce its exposure to equity and raise exposure in debt and money market instruments.

Under normal circumstances, it is anticipated that the asset allocation shall be as follows:
 

Instruments	Allocation Range (%)		Risk Profile High/Medium/Low
	Minimum	Maximum
Equity and equity related instruments$	30	60	High
Net Equity Arbitrage Exposure*$	5	10	Medium to High
Debt Securities and Money Market Instruments#$	30	60	Low to medium

Notes: *Equity exposure would be hedged with corresponding equity derivatives of 5% - 10%.The idea is not to increase equity exposure by using derivatives.
$Includes investments in derivatives (gross exposure shall not exceed 50% of the asset allocation stipulated above for the relevant instrument category).
#The Scheme may invest in Treasury Bills, Repos & Collateralized Borrowing and Lending Obligations (“CBLO”). The Scheme shall not invest in foreign securities.
The margin money requirement for the purposes of derivative exposure may be held in the form of Term Deposit.
Investment in securitized debt may be made to the extent of 20% of net assets of the scheme. The Scheme shall not invest in foreign securitized debt.

(Source: Scheme Information Document)  

JPMIBAF will benchmark its performance to the CRISIL Balanced Fund Index.

 

Fund Manager Profile

Equity Portion:

Mr. Amit Gadgil is a chartered accountant and PGDM from IIM Ahmedabad. He also has about twelve years of experience in the accounting and financial services sector. He has been working with JPMorgan Asset Management since February 2007. Prior to joining the firm, he worked for seven months with Hansberger Global Investors as a Research Analyst and for 2.5 years with Deutsche Equities India Private Limited as an Analyst covering the banking, insurance and cement industries. He worked with JPMorgan Investment Banking team in New York for six months after completing his MBA. As a part of his MBA course, Mr. Gadgil did summer internship with JPMorgan, New York where he was engaged in research of US apparel stocks. He started his career in the auditing and business services and worked with Price Waterhouse Coopers and A F Ferguson & Co.

Mr. Karan Sikka is a CFA charter holder and a Chartered Accountant. He has Completed Post Graduate Diploma in international business from Delhi University. Prior to joining Asset Management, in 2007 he worked in Investment Banking Research on ECM and CB desk. He has worked with Principal Asset Management and ICICI Bank earlier in his career. Mr. Sikka joined JPMorgan in December 2004. His total work experience is 12 years

Debt Portion:

Mr. Namdev Chougule had a B.E. (Elect.) and MMS (Finance) and he has passed Financial Risk Managers examination conducted by the Global Association of Risk Professionals. He also holds a Chartered Financial Analyst qualification. He has worked in the financial services sector for approximately 13 (Thirteen) years as a dealer, analyst and fund manager for several leading mutual funds and banks. Prior to joining the AMC, Namdev worked for a year as a Fixed Income fund manager with Lotus India Asset Management Company Private Limited and around 6 (Six) months as a Fixed Income Analyst with JM Financial Asset Management Company Limited.

Mr. Ravi Ratanpal is a commerce graduate from Mumbai University and MBA (Finance). He is also a certified Financial Risk Manager (FRM) from Global Association of Risk Professionals. He has experience in debt capital markets research. Prior to his moving into the JPMorgan Asset Management team, he was part of JPMorgan Investment Banking Research team. His total experience is 10 years.

 

Fund Outlook

Currently, stocks are trading at high valuations and the outlook of the equity markets is uncertain as the market has already factored in most of the positives. A rise in international crude prices, inflation and the Federal Reserve raising interest rates could impact the markets negatively. Corporate performance has failed to impress so far. Direction of equity markets would largely depend on corporate earnings, going forward, in the near term we can expect a modicum of volatility in the markets as earnings season kicks in and uncertainty on when the fed will begin raising interest rates will also affect markets.

RBI recently lowered policy rates by another 25bps (0.25%). This has been the second rate cut in the calendar year 2015. RBI expects that recent structural changes undertaken by the Government may in-deed help improve supply constraints. However, the next rate cut by the RBI might be delayed if food inflation rises due to the impact of unseasonal rains on Rabi crops. Moreover, RBI has suggested that, future monetary policy actions would primarily depend on the easing of supply constraints, improved availability of key inputs such as power, land, minerals and infrastructure, continuing progress on high-quality fiscal consolidation, the pass through of past rate cuts into lending rates. The RBI would also be watchful of factors affecting food inflation and thus would track climatic changes and developments in the international environment. Escalating crude oil prices at the international market may result in higher inflation in India. The RBI expects, the response of the Government in sticking to the commonly chalked out inflation targets making efforts to improve supply constraints.

 

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