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The Edelweiss Absolute Return Fund is a product that has caught the fancy of some savvy advisors, but has perhaps yet to see the kind of sales traction that the theme warrants - because its uniqueness makes it difficult to slot it conveniently into one of the established product categories. Some advisors think it could be an attractive alternative to MIPs, some think it competes against balanced funds and some think it is a good solution for investors who desire an equity exposure but are wary of volatility. We spoke with some leading IFAs to understand how they view this fund and what place it finds in their client portfolios. Read on to understand what this product really does and how some smart advisors are positioning it.
When you come across something new, something different, you naturally tend to slot it into a known category, to enable a better understanding of the product. The MF industry has established product categories and many funds within each category - it has a range of equity sub categories, a range of debt sub categories and a growing range of hybrid sub categories. One outlier which eludes this "slotting" process is the Edelweiss Absolute Return Fund. It is an equity oriented fund, but distributes quarterly dividends like you would expect from the best MIPs.
What exactly does the fund do?
Edelweiss Absolute Return Fund is an open ended equity scheme that seeks to generate absolute returns with low volatility over a longer tenure of time. The Scheme focuses on High Quality Growth with Low Volatility. It combines 3 broader level strategies of: Low Risk, Trading in Corporate Actions and Hedged Equity Investing. Appropriate combination of these strategies endeavors to yield absolute, uncorrelated and consistent returns.
Low Risk Strategies:
1. Combination of arbitrage investments and money-market instruments - depending on yields available in each
2. Opportunity to earn steady returns with very low risk.
3. Provides base of fund returns - utilises undeployed capital from other strategies to be deployed. Acts as a cash-management tool for improving investor yields
To conclude
5. We've heard Roopa's wise views on how an MIP ought to be positioned and how this fund can fit the bill in that positioning - as a secondary source of income, with the potential to beat inflation over a market cycle. We've heard Mukesh bhai's incisive analysis of exactly why he positions this fund as an equity oriented investment for older HNIs. We've also understood why he believes this fund competes well versus balanced funds. The one common factor that runs between both these expert opinions is the belief that this fund is a good inflation buster over a market cycle. The fact that it distributes regular dividends due to the fund construct and management style, gives investors a strong reason to stay invested through the down cycle and thus reap the benefits of an upcycle when its turn comes - and therefore actually get the benefit of beating inflation in the long run. So, how do you think this fund should be positioned : as an alternative to MIPs or an alternative to balanced funds or simply as an inflation buster that investors are more likely to stay with, given its dividend distribution focus?
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