Quant Dynamic Asset Allocation Fund becomes an equity fund after debt fund tax rule change (2024)

Published on March 25, 2023 / By M. Pattabiraman Twitter: @pattufreefincal

Published: March 25, 2023 at 7:15 pm

Last Updated on March 25, 2023 at 7:15 pm

In our coverage of thechange in debt mutual fund taxation rule from 1st April 2023, we have pointed out that several funds will modify their investment mandate. See:Debt mutual funds to be taxed as per slab from 1st April 2023! AndWill SEBI help investors and AMCs tackle the debt fund taxation rule change?

Freefincal investor circle member Piash shared an email from Quant mutual fund indicating that they have modified the investment strategy of their NFO Quant Dynamic Asset Allocation Fund to ensure its taxation status is equity-like in the new financial year.

The following is an extract from the email.

Today, the Parliament passed the Finance Bill, 2023 along with certain amendments. The most significant amendment was the withdrawal of the benefit of indexation on long term capital gains on debt mutual funds for investments made on or after April 1, 2023. From April 1, 2023, debt mutual fund schemes will be taxed at Income tax rates applicable to an individual’s income tax slab. This has significantly affected our earlier positioning and consequently the strategy of quant DAAF from a taxation perspective.
In view of this impact, and in the larger interest of our investors, quant AMC has unanimously decided to reposition the quant DAAF and modify its taxation from debt to equity due to said amendments to the Finance Bill, 2023. Therefore the amended investment strategy of quant DAAF, superseding our previous communication, stands as:-
The unique feature of the scheme stems from its mandate to dynamically rebalance equity exposure (0 to 100%) and debt exposure (0 to 35%), in line with our view on Risk-On or Risk-Off environment, to earn superior risk-adjusted returns. quant money managers have full flexibility and can even hedge up to 100% equity exposure by using derivative instruments in extreme risk-off environment.
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Quant DAAF aims to capture upside in the bull phase and limit the downside in the bear phase and thus reduce the volatility of the overall portfolio.
Even under its newly repositioned avatar, the product is positioned towards traditional investors. In line with our dynamic style of money management, quant DAAF portfolio will be managed dynamically in line with our Risk-On or Risk-Off view on macro environment. Investors can expect to benefit from our VLRT Framework which is an overarching framework for all our funds.

We expect more AMCs to follow suit. Forthcoming NFOs will also be modified to account for this rule change.

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