The Axis All Seasons Debt fund, a fund of fund (FoF) opens for subscription on 10th January, 2020 and closes on 20th January 2020. The minimum application amount for this fund is Rs.5000 and in multiples of Re.1 thereafter. As an FoF, the fund will invest in the units of other debt-oriented mutual fund schemes. But unlike other FoFs that typically invest only in the schemes of the same fund house, the Axis All Seasons fund will select schemes across fund houses. The fund will be managed dynamically to invest in different segments of the debt market so that the fund manager can utilize investment opportunities as they arise.
The advantage of using the FoF structure to dynamically manage investments in debt markets is that there is a professional fund manager who has the responsibility to select the schemes that will be included in the portfolio and to rebalance the portfolio when it is required. Reading the rebalancing signals in debt markets is a difficult ask for the retail investor and this responsibility is now taken over by the fund manager. Moreover, there are no tax implications for the FoF when switching between schemes that invest in different segments of the market. If the investor were to implement the strategy themselves, they would be liable for capital gains tax when they shifted their investments from one scheme to another to implement a market view. The Axis All Seasons fund is also expected to bring greater diversification benefits to the investor since they may invest in schemes other than the Axis mutual fund scheme.
The FoF structure implies costs to the investor at two levels. One which is charged by the FoF and the other which is charged by the underlying mutual fund scheme. This has been perceived as a disadvantage to investors in FoFs. Sebi has addressed this issue by capping the total expense ratio that an FoF can charge, including the weighted average of the total expense ratio levied by the underlying scheme(s) at 2%.
“The Scheme is good for a DIY investor who does not have access to a financial advisor. However, someone who wants to take concentrated bets in the debt space will not find it useful", said Amol Joshi of Plan Rupee Investment Advisors.