NFO Pick – (SBI Dynamic Asset Allocation Active FOF)

2 Sep 2025 , 06:04 AM

THE PROBLEM OF PREDICTING MARKET DIRECTION

We all know that equity funds will do best when equity markets rally, while debt funds tend to do well when the interest rates and bond yields are on the way down. However, the real challenge is to know when to position your portfolio appropriately. One way is to leave it to the wisdom of fund managers and the dynamic asset allocation fund is all about that. Fund managers, with their expertise and research, reallocate between equity and debt based on their outlook. Over a longer period of time, such allocation boosts risk-adjusted returns.

One of the standard statements we get to hear is that, since asset timing is difficult, it is best to create a diversified portfolio and let the market balance out your returns. However, there is an option wherein you can combine diversification and market timing. In a dynamic asset allocation fund, the fund managers strategically move in and out of equity and debt, so as to make the best of market timing packets. After all, winners do not repeat, but fund managers can create a winning formula by dynamically allocating between equity and debt.

HOW WILL THE FUND BE ALLOCATED TO EQUITY AND DEBT?

Here are 3 ways in which the funds will be allocated and the maximum and minimum allocation proportions that will be maintained. Here is the broad charter.

• The fund will allocate a minimum of 35% and maximum of 100% to actively managed equity and equity-oriented schemes. This portion of the allocation will determine whether it would be an equity classification or non-equity classification.
• The fund will allocate a minimum of 0% and maximum of 65% to actively managed debt and debt-oriented schemes. This portion of the allocation will determine whether it would be a hybrid debt fund or a pure debt fund; where LTCG is treated as STCG.
• There will be a peripheral allocation of 0% to 5% to money market instruments with maturity not exceeding 91 days. The purpose of this allocation is more to maintain liquidity balance in the fund under redemption pressure.

While the tax treatment will depend on the actual allocation; it is true that such a FOF allows investors to dynamically allocation in a tax-efficient manner.

GLANCE AT THE SBI DYNAMIC ASSET ALLOCATION ACTIVE FOF NFO

Here are key details of the SBI Dynamic Asset Allocation Active FOF NFO.

• NFO opened on August 25, 2025 and closes on September 08, 2025. It is an open ended Fund of Funds (FOF) scheme investing in a combination of equity and debt on a dynamic basis in order to maximize risk-adjusted returns.
• On the risk-o-meter, SBI Dynamic Asset Allocation Active FOF is classified as “High Risk,” due to its substantial exposure to equity. Also, there is the risk of dynamic allocation decisions as well as the risk of investing in units of SBI funds, being an FOF.
• The SBI Dynamic Asset Allocation Active FOF is best suited to investors looking at long term returns, through an investment in actively managed equity and debt-oriented units. It offers Growth, Dividend, Reinvestment Options; and Direct and Regular Plans.
• The benchmark for the fund will be the Nifty 50 Hybrid Composite Debt 50:50 Index. Nidhi Chawla will manage the equity portion, while Ardhendu Bhattacharya will manage the debt portion.
• Minimum application amount in NFO is ₹5,000 and multiples of ₹1 thereof. The minimum allocation to additional purchases, will be ₹1,000 and in multiples of ₹1 thereafter. They are compatible with SIP, STP, and SWP.
• There will be an exit load of 1.00% of applicable NAV, if redeemed within 12 months from date of allotment of units. There will be no exit load after that. Even withing the `12-month period, exit load will only apply to beyond 25% of units held.

SBI Dynamic Asset Allocation Active FOF will be classified as an equity or non-equity scheme based on the actual percentages of equity and debt in the portfolio. However, the real benefit of the FOF will come from the tax-free asset reallocation between debt and equity.