Mutual fund managers play safe, trim market exposure

Mutual fund managers, who have the option to choose between equity and debt in the portfolios they handle, are going for the traditionally safer instrument amidst the markets’ recordbreaking run. Balanced advantage funds — a product that allows fund managers to aggressively shift allocation to equity or debt — have cut their stock market exposure to the lowest in recent times with money managers turning increasingly cautious about the market’s prospects due to lofty share valuation, global uncertainties and the upcoming national elections. ICICI Prudential Balanced Advantage Fund, the largest scheme in this category with assets under management of Rs 28,600 crore, has reduced equity allocation over the last one year to 32% from 42%, the lowest since March 2010. Aditya Birla Sun Life Balanced Advantage has cut its exposure to 46% from 74% while L&T Dynamic Equity has cut it to 28% from 67%, data available till July 31 shows. Fund managers said the falling allocation is a result of rich valuations. “Markets and sentiments both are at an all time high. The low equity exposure in balanced advantage funds is an indicator of equity valuations,” said S Naren, CIO, ICICI Prudential Mutual Fund.

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