The Mutual Fund Show: What To Expect From Equity Savings And Arbitrage Funds
Equity investments come with a higher risk while debt usually offers lower returns. There is another option for investors that offers a mix of both-- hybrid funds.
These offer higher returns than debt schemes but are not as risky as equity funds.
According to two financial advisers BloombergQuint spoke with, a hybrid fund endeavors to create a balanced portfolio to offer regular income to its investors along with capital appreciation in the long-term. But the choice depends on risk preferences and investment objective.
There are six categories of Hybrid Funds.
Equity Savings Fund
Dynamic Asset Allocation or Balanced Advantage Fund
Aggressive Hybrid Fund
Conservative Hybrid Fund
Multi-Asset Allocation Fund
Within the hybrid category are two subsets of equity savings and arbitrage funds. Equity Savings Funds and Arbitrage funds. Both are individually well suited for different kinds of investors, Raghav Iyengar, chief business officer at Axis Mutual Fund, said on The Mutual Fund Show.
Iyengar said the equity savings category is good for new investors who don't like volatility. He said these funds corrected lesser compared to peers during the March 2020 market crash triggered by the Covid-19 first wave. "The important thing to do in this category while choosing funds is to see how funds have done during a drawdown," he said.
While the quality of portfolio in these funds is usually good with equity mainly in large-cap bluechip category and debt in high-quality AAA-rated, Tarun Birani, founder and director, TBNG Capital Advisors said, the structure and expense ratio of this product is not ideal. He said as the equity portion in this category gets capped at 45% equity, the expense ratio is charged like an equity fund.
He recommended a 20-30% allocation in a pure equity fund, 20-30% in dynamic asset allocation strategy with 0-100% equity and balance in debt/arbitrage to get better post-investment experience.
This strategy has generated 11% CAGR in the last five years with a minimum of 3% in 2016 and a max of 16% in 2017, with much better expense ratio comfort for investors.
Meanwhile, Iyengar said the arbitrage category is under-explained. Arbitrage funds are hybrid mutual funds that generate returns by using the strategy of simultaneously buying and selling of securities in different markets to take advantage of different prices. The category's asset under management has nearly doubled in the past six months.
Iyengar said the chances of failure in this category are minimum as it is a very well-oiled mechanism that all funds have, and the entire chain is very well regulated, and thus the certainty of returns is high. He said the low interest rates are one key reason why the category has gotten more money.
Birani said this category also benefits from equity taxation, and with debt short term yields at the lower end of 4%, the post-tax investor experience can be better in this category.
Watch the full show here:
Here are the edited excerpts from the interview:
We're going to start off with two categories of mutual funds, it's the equity savings category or equity savings scheme and arbitrage funds. These are under the umbrella of hybrid funds. So, should we start with equity savings, if you will?
RAGHAV IYENGAR: Equity savings is a beautiful name because the category is so beautiful, as a name I can't think of a better name. Everybody saves, India is a country of savers—everybody knows that. I think it's one of the fundamental ingrained habits that we have inherited from our parents or grandparents so obviously I think a lot of that savings now is going towards equity. So, as a category name it is absolutely wonderful. It's one of the six off-shoots within the sub-categories of hybrid funds. In some sense, it's a relatively unknown category. When you think of hybrid funds what you really think about are, the balanced advantage funds or the dynamic equity funds category, because that's obviously the really big category. As you know, overall if I were to look at hybrid funds as a total, it's roughly 12-13% of the total industry. The industry just crossed 36 lakh crore in the end of August and this category is roughly about both a lakh plus and within that space of course you have the two mega categories which is the erstwhile balanced funds show today called aggressive hybrid funds and of course you have the balanced advantage fund or dynamic equity funds, these are the two big superstars in the category.
The equity savings category is actually a little, if I were to put it in a really layman's language, like the younger brother of the balanced advantage category. This category is treated as an equity fund. What that means is at any point of time, the exposure to equities will be 65% plus. The interesting thing about this category is that in equity there are two types of ways you can put money in — through regular equity instruments and arbitrage or futures, which are in some sense, like a fixed income instrument because they don't move, they are hedged into the portfolio.
The next category we'll talk about, this style has a much greater stay there. What equity savings does is, it puts about 20 to 40% of the total Rs 100 that you have. It goes into regular equity stocks; it could be stocks of any variety. Now, that's another thing I'll talk to you about in a minute and the remaining money, which is the difference between 65 and 20 and 40 and that 20 or 40 is subjective. It can be various fund managers, various fund houses have their various interpretations of how to manage that 20 to 40-45 the difference of that goes in. So, you get the benefits of equity taxation but when market falls, you don't get the full impact of the market fall at all, and that we saw last year. If you remember, just about 18 months back, we were in the middle of possibly the greatest financial fall that I've seen in my life. I think the second highest and after a century, you had that kind of a crash and this category actually felt it very less. Obviously, it did manage to catch up with the balanced advantage fund in that sense in terms of its total returns through the last one year. I mean, the category has been in the region of 20% plus. So, it's a good place for somebody who wants to step in for the first time. At the same time, the difference between this one and balanced advantage is that the balanced advantaged fund can go between 30% equity to 80%. It's a fairly wide range. Here it's largely 20 to 45. So, somebody who's a little more conservative or maybe somebody who's got money for maybe two years, three years, wants slightly better returns and traditional fixed income instruments wants to have that liquidity and that tax benefit because this is treated as an equity fund, so you pay much lower levels of taxation. If you hold for more than a year you just pay about 10%, if you take it out before one year you pay about 15% so much lower than your traditional or other fixed income instruments that come in. So, it is a poor cousin of the balanced advantage category. What happened in this space of course is what the regulator has given us—all various buckets of schemes to put in. So, there is an equity savings scheme but within that scheme, fund houses can do essentially whatever they want. I mean they can buy the debt portion which is 35% typically, they can buy anything. You can buy 10-year or 20-year government securities or you can buy anything. There's no rating classification and same thing on the equity side, I mean the 20 to 45% as I said, it can be multi-cap or can be flexi-cap, or you can put into small-cap mid-cap large-cap. So, when you look at the category you will see a lot of difference in the performances because everyone has their own style of managing and I'm not saying it's good or bad. Within the Axis fund umbrella, we largely invest in very large-cap stocks in this portfolio, so it's actually a mega-cap portfolio because we believe the guy who is coming in here is a bit more conservative and may not have the stomach to take a small-cap or a mid-cap allocation. Same thing on the debt side, we have a lot of exposure to AAA and above but that changes from fund house to fund house. So, this category maybe three, four or five years back when they initially got launched got a lot of excitement but somewhere that asset allocation didn't work very well, and I don't think investors had a great experience. But yes, with the benefit of hindsight and obviously now with things becoming far more transparent in terms of what you buy, trans-portfolios, disclosures, I think that the regulator is doing an amazing job and making sure that all the information is available out there. I think there is far more awareness of this space. My view is that, yes, it's a poor cousin, but I think time picks up, as markets keep rising and as people want slightly more defensive portfolios, they'll probably show over here into this equity saver category.
Where is it that you guys are at when it comes to these bifurcations? What percentages in equity and what about the remaining percentages and why would you for example believe, I'm not asking you to advertise the Axis way of investing, but just trying to understand the rationale behind the way in which your construct would have been done and how much is the industry varying on the other side, the non-equity side?
RAGHAV IYENGAR: So, the fixed income part is largely constant at 35, everybody sticks to that space because that's the maximum allowance, it's a fund which gets equity taxation so everybody's there. Within the fixed income space, there are people who have obviously lower duration, some people have more credit, within in the Axis space, there’s largely very high-quality credit and moderate duration. We again as I said, our view is that this is for an investor who is a bit more conservative, willing to give up a little bit of return but wants to see slightly better protection especially when drawdowns happen, like what happened, may not be as extreme as March, but drawdowns will keep happening. That's a feature of equity investing you can't run away from it. On the equity side, it’s largely between 20 and 45, typically, as of August we were at about 41 and that was last year on the back of the fact that at Axis we felt that performance is improving, markets are more buoyant, there’s more liquidity, all the other reasons which will be there but within that space again, we’re largely stuck to a very large mega-cap names, the typically the NSE 50 names is what you'll find largely in the majority of the portfolio. That's done quite well for us, in the sense I can't complain. As I said this is a fun where people should not be very comparative, I think people should go by their impression of a fund house actually, don't get into individuals because if you start looking at X Y, Z gave x return and somebody else gave y returns—things are different, because the signs of management are going to be very different. Even though it comes under the same category, the way people run it because as I was telling you, there are no restrictions for the fund managers either in equity or in debt. So, people could run very different philosophies here and it could throw up some very different results. So, I think there it's more to do with the fund house, the risk management, the perception that you have with the brand or how the fund has done typically during market falls, or more than market corrections, I think those are some of the factors that you should take into account when you're looking at this category, but it's a beautiful category. Anyone who comes in and asks me if I want to put money in equity, given where valuations are, I tell them, you have to have a very decently long horizon. In this one you could have a slightly shorter horizon. Anyway, anything you keep over a year attracts only 10% capital gains tax. So that's the big advantage to you compared to other investment avenues that you have.
What about the remaining 20%?
RAGHAV IYENGAR: That goes into arbitrage which enables equity taxation but provides returns which are very similar to very short-dated fixed income instruments. So that's in some sense the balancing quotient. So obviously if you have a very negative view of markets or whatever you put that 45, it could come down to 25 or 30, and obviously the arbitrage portion increases from 25 to 30, so that's how it works.
What kind of investors would you reckon from a suitability perspective should come into this equity savings category? In the current market context as well wherein the valuations are limited, etc., what's the percentage of allocation to a scheme like equity savings? And because a lot of mutual fund schemes tend to become very close to each other in terms of the nature, in terms of the returns that they deliver etc., what comes closest to equity savings so that people understand the difference between the two?
RAGHAV IYENGAR: That's a nice question. Let’s start with the first one, as I said, you can have a slightly shorter investment price unlike, let's say, pure equity funds or aggressive hybrid funds, or even balanced advantage funds, where I would even today say that for somebody with a balanced advantage fund, and that money I would say to you need to give it five years because these funds tend to do very well over a cycle. This fund does not have that problem so someone with a two-three-year investment horizon can comfortably look at it. The biggest question I get and I'm sure you get that too today is that's I want to invest money but where do I go. Everyone's looking at the Sensex and I keep telling them, don't worry about that. That's just a number but when we get into economy and we get into prognosis, it's a very debatable topic. My view on economy and your view could be fundamentally very different or both could be correct. There will be periods of time where I will do very well like in August, my view would have been a hero but in July yours would have been a hero. So, this product is beautiful for those kinds of people. If you have some plan to get some sort of a regular income, you could do a SWP from this fund, especially after one year because then it becomes equity taxation for you. That's another interesting place. So, I have a lot of people, my dad's friends who ask me what do I do with it? And obviously I tell them that this is a little more aggressive but if you can hold on, maybe create some accumulation and then maybe after two three years if you want to take out some money, this is a good place for you to take it out. So, in that sense it's a great solution orientation. Let's say I'm a parent, I have a child going abroad, I have educational needs, then save up money for maybe two, three years later hopefully build up some accumulation and then start withdrawing from that point.
It gives you the benefit of equity, and a little bit of stability of fixed income. That's the whole idea of hybrid funds because you're investing in asset classes which generally behave very differently at points of time and hopefully that mix will give you a much better investment experience.
Is there a category that comes very close to this? I heard you say balanced advantage but I'm still wanting that clarity?
RAGHAV IYENGAR: Balanced advantage in the past has worked very close because most fund managers as have rejected equity especially in rising markets. That is again a fund house so you can technically go 30 to 80. There are many fund officers who are yet reasonably aggressive on equity even today. So, in that sense it's quite a unique proposition but the closest proposition to this would be BAF or dynamic equity. In terms of equity allocations obviously the closest one that will come to this will be what I call the conservative hybrid funds. That's a lovely category that I'd like to talk to you about hopefully next month we'll spend some time on that but that used to be the erstwhile monthly income plans. They used to be a very mega category in the 80s and 90s. But in terms of equity allocations, they’ll very similar because that one does about 25% and this fund does about 40%. So, in that sense, they are very similar. If you look at it currently today, the current equity allocation will be very similar to balanced advantage funds in the industry.
Did I hear you say that the returns expectations should be between 15 and 20%?
RAGHAV IYENGAR: I said that the one-year return was about 20% but obviously that's coming on the back of some fantastic equity performance.
What is the average return anticipation that somebody can do?
RAGHAV IYENGAR: It's a tough one because frankly, you don't know where equity markets are going in the next three, four or five years but typically if your view is that equities are in the 8-10% return asset class I think this will give you somewhere, a couple of 3-4% around that. Predicting returns is a very dangerous occupation, you will know that better than I do.
Any other point that we missed out in this?
RAGHAV IYENGAR: The key thing here is trying to figure out concept on during a drought. I think that's the important one in this category. What people tend to do is they just tend to look at the category and then sort it by descending sort—one year, three years and so on but as I said, the portfolios and the way style of managements are very different because that's how the portfolios are structured. So, you have the same name but it could be a very different underlying product for various types of fund houses unlike let's say a large-cap or a mid-cap or something where you have to follow a certain time frame.
What is this arbitrage category because a lot of people get told to invest in the arbitrage funds instead of parking money in a bank or a fixed deposit to say? And if you don't know when you might need it but you might need it in the next six to nine to 12 months, go and park it in arbitrage funds. Tell us what arbitrage funds are all about?
RAGHAV IYENGAR: This is an under-explained category but it's also a very popular category. Just to give you a sense, this category has got huge flows in the last four to five months. This whole industry used to be about 60,000 crore as I'm talking to you. My last number I saw was about almost 1,10,000 crore so it's practically doubled in the last maybe five, six months. Here what happens again is that, as you know, you can buy stocks in cash you can buy stocks in futures. There's an F&O list, which is an options list there’s a price of a stock there, there is a price of a stock in the cash market. Sometimes there is a difference in the price, but it will converge towards the end. Typically, these stock prices in the last Thursday of every month, that's what we call the settlement day the exchanges have a settlement day, that's a monthly settlement—these prices will converge. But arbitrageurs are very smart fund managers who try and take a difference and try and capture this difference. It's very minute, but in percentage terms it's sometimes it's 2, 3-4 or 5%. That's one part of it. Number two is of course, the level of interest rates also determines the kind of spirit that you're willing to look at. Third is obviously the interest level in the market. So obviously the market is very bullish and enthusiastic as it is right now you could get a very decent spread there have been periods of time last year to give you an example where the spreads are just completely crashed. I think at one month, they actually went negative which is very rare but it happened. I think if I'm not mistaken, I think it was April 2020, but as I said, very rarely. So these are some of the factors that affect returns. Now, why do investors, even qualified investors find it difficult to capture this? Now, there's a very robust and large market. In fact, if you remember the earlier days the ‘Badla’ system, this is in some sense the risk managed avatar of Badla. So, chances of a failure here are very less. So in that sense, yes it's a much more carefully controlled system. Now what makes this product very attractive, and of course the same logic applies, it is a Rs 100 portfolio, 35 goes into debt part of that debt is put into margins, because being able to buy these futures, you have to have certain margins—those margins are largely debt security so part of it could be either fixed deposits or government securities—so very safe, essentially, which the bank will keep as a margin for you to be allowed to do it, that is just for the exchange rate. That is a well-managed and beautifully regulated system and that's a fact what makes the Indian equity markets very deep. In fact, the F&O market is many times the size of the cash market, but it's a tricky market, one needs to be careful about it. The easiest thing is to get caught in an F&O business but be careful because it is borrowed money. It is like, you're pledging your house and buying equity with it, it could cut in very dangerously. Why has this category got so much money? One, as you know, interest rates have come down. If you go to a bank or you go to anybody else the short-term interest rates are practically not there because as you know there’s a huge amount of liquidity in the system, economy is just starting to pick up, lending opportunities are there but they will keep coming but as of now, as there is, there's more money available than to be deployed. I want to make a short-term thing and many people tend to put money in arbitrage for three, six, nine or 12 months. The same logic applies which I spoke about the equity savings because these are treated as equity funds with a slightly lower treatment of tax incidence, so short-term capital gains taxes is 15%, long-term capital gains taxes 10%. If you look at the returns again it's not very different. If you see the highest performing fund, if you see the category would be like last year will be about 4%. It's all in that 3.5-3.7% because the short-term rates are very pretty much clustered around a certain level and those levels makes them available in the economy. So, why do people come here because let’s say, hypothetically you make3.5%, and then you pay 15% capital gains tax when you take out money. So, effectively you're paying about a 0.5% of tax so you make 3% post tax return. Now, 3% post tax return for say three months or six months investment is very good it's almost like a 1-1.5% higher than what you paid. Now, where do these returns change? One is obviously as I said, depending on those various factors arbitrage levels could come down, that level gets determined at the end of every month. So it used to be, as I said, once upon a time as high as 7-8% annualised, but it came down all the way last year to sub 2%. So the returns do fluctuate, it's not that once you put it in that money is locked in forever. In that sense it's very different from any other fixed income traditional investments. This has taxation and that's critical.
Many people make one mistake is that they try and put very short-term money into arbitrage, which is a very wrong thing to do. You do have volatility in this product. The volatility is at its lowest towards the end of the month but if you try and do it right now, for example, there's a good chance that you may catch a positive mark-to-market or a negative mark-to-market because your spreads may be different during the middle of the month. Number two, this being an equity fund follows the same equity settlement cycle. So, you will get your money in three businesses unlike let us say, a liquid fund where you can get it in one.
Why am I saying liquid fund or ultra-short-term fund because these are the traditional places where people go and park money for very short term and rightfully so, if you keep money for 15, 20-30 days one is that you could lose interest for those three days because you're going to get money after three working days. So, if you redeem today three working days is actually tomorrow, Monday and Tuesday because Friday's a holiday because of Ganesh Chaturthi. So that's one thing that you need to be very careful about. Having said that, it's a nice category as I said it has a lot of flows. A lot of people, especially when they're confused about what to do with those either they park it here or they have a very short-term a three, six or nine months later they know that the money is going to come up. It's a great place to do it. Ideally, yes you should try and redeem and put in money towards the end of the month because that's the time when your spreads are the best and that's the time we'll be actually able to figure out what the real rates are and this spread number is now easily available, we'll get a rough idea of what it is. It is not a guarded secret you can get a sense if you Google it, it is not very difficult. Same thing on the debt side, like I said, because you can do whatever you want with debt. As I said, in this category, there are no stipulations as to buy, AAA, AA or whatever you want, you can do practically anything but being very short-term category people, fund houses are aware that money doesn't stay for long periods of time. Most of us tend to buy short duration assets but debt also could be a bit different because if I have a AAA portfolio, let's say Axis largely buys conservative debt, and if somebody has a AA strategy, he will outperform that 30-40 basis points gap, it is possible. The same thing which has the same thumb rule, when you do a descending sort and you see a X being at four and somebody will be a 360 or 370, it's not relevant, you have to actually figure out internally, what the fund house is actually doing to make that additional 20-30 basis points.
I've heard you say that people parking money in arbitrage funds for very short-term are making a mistake. So, what's the ideal Investing duration if one is looking at arbitrage funds?
RAGHAV IYENGAR: Ideally three months plus, and there’s no top end and because like I said, these are park-in instruments. Some people have clarity on when they need the money.
If I have clarity that I want to invest for 12 months, are arbitrage funds the right option or should I choose other options?
RAGHAV IYENGAR: At this point of time, I'm a fan of other options because it's my view of interest rates. I think interest rates will, my guess is that—given that economy's doing so well, will start going up a bit. That's the natural progression. So, I have a one-year view that I might get something slightly better with a one-year duration, kind of a scheme, it is possible for me to get that. The other thing which people tend to forget is that you also lose the additional days when you get it. Again, this is my personal view, I get a lot of dissent on this but that's what I believe. The end part is very easy, what I want to make very clear is don't put money for 15 days, I've seen that happen. People think that it is giving me returns, it's a very safe instrument like I explained the structure of it so that way there's no problem but people say okay with safety is very similar to a liquid fund so they put 15, 20-30 days or a month, that I think is playing a bit with fire, you might get stuck and three months plus is perfect. Obviously if you want to keep it for more than a year, the same equity taxation rules kick in, that you pay tax at 10% not because it is a long-term capital gains tax. Of course, if you take it out before one year it's about 15%.
Tarun, is there one or two points that you want to add either for equity savings or for arbitrage funds and then of course, I would love you to tell us more about what are the options available and what should people keep in mind?
TARUN BIRANI: I was hearing the conversation and this entire equity saving category or these hybrid categories have been originated, actually if you go back to history, it has been originated out of approach for asset allocation. We have been there when there is a high bull market and everybody feels that equity is the only asset class to play but that's not the correct thing. 90 to 95% of the actual long-term returns are generated because of asset allocation. So, I think these categories, or these strategies have a right fundamental approach to start with, but what I just want to address for this category called equity saver category, which you guys are talking about, one is, this category again has been positioned more for retired people, conservative investors, people who are looking at low equity exposure in the portfolio, low risk and low drawdown in the portfolio. But again, when I was looking at this specific fund, which he was talking about, which has high quality portfolio, the equity mixes into large-cap equity, the debt mix is again into high quality debt, the arbitrage category, again is a great way to get tax efficient returns but my bigger issue with this strategy is expense. The expense ratio of this product is at a normal equity fund. When you are putting 40-45% of equity in a category and the expense structure is at 2-2.5%, which according to me is not a very investor friendly product, for at least a smart and savvy investor. People who can't do the structuring themselves, I think it is a great product for them to look at because they get a ready solution where rebalancing is happening, the debt equity dynamic allocation is happening, arbitrage is happening, debt is happening but my disconnect is on the expense structure—for a larger sophisticated client, it may not be a great structure. I did a study on our portfolio which we did for a client. Two years before wherein we have put in 20 to 25% into a pure equity option, and 25% into the dynamic asset allocation category, which has an option to move between 0 to 100% into equity and the balance into debt category. The results compared to let's say this category versus debt allocation was slightly 1-2% better alpha has been generated by that. So, I feel for an investor who has the knowledge and the bandwidth and maybe who has an adviser who can advise him to create a post-tax better experience, I think that could be looked at. Again, the debt structure one needs to stay for three years. That is very critical, if you go for one year your tax efficiency goes away. So again, this product has been beautifully structured to give you a good tax efficient experience but for a three-year horizon, I would go for something like that structure, not for this kind of structure. Again, if you look at it in the current environment, what are the challenges with this category? The arbitrage yields are again less than 4% as we talk, the spreads are lower right now and the debt yields, and the short-term debt is also lower right now so the returns which this category is going to make is largely because of equity. Tomorrow, let's say a two-year, three year you are putting your money at the top of the equity markets. Again, from a two to three-year point of view, you should be ready for a very high volatility in your returns because let's say 60% of your portfolio is generating 4% return and the balance 40% is flat. If it doesn't give you any returns, it is quite possible your return experience for one two years, may go bad. So, you need to keep a three-year horizon for this investment. Otherwise, you may not have a very great experience with this product also. So, it is very critical to look at that. Talking about the arbitrage category, again, it's a beautiful category and as Raghav rightly mentioned, it is a very well-regulated system, originated from the Badla system and as we talk right now, the spreads are not great, it is less than 4% as we talk, but from a tax efficiency point of view, it's a great product, anybody who has a three-to-six month kind of funds parking capability should look at an option like this because the option in the short-term debt are very limited as we talk right now but again, this market is also as we talk, it's more than 1 lakh crore in size. There are limitations when so much money is chasing the yields and the market volatility is less right now. So, you should not expect very high returns from this category also.
Let's say the start of the year, in January, somebody who has put money into arbitrage funds, what's the ideal time, should one keep it for less than 12 months strictly, because it's better to do it that way, with the situation right now or how would you guys do it?
TARUN BIRANI: I think the maximum could be decided based on the market environment where you are right now. So, in the current environment, I think since we have limited options, you have already completed the money, so stay invested. I would recommend to stay invested and not to get out.
Tarun, a couple of funds and why do you like them in both categories, if you will?
TARUN BIRANI: At this point of time, I want to share some categories which I feel one should look at. At the high equity market, I would rather look at a category which has more dynamism to go from 0 to 100% of equity, which can help me protect my downside by 50 to 70% and which can give me a 90% or 80% upside when the market goes up.
There is another, not-to-go category, that is a small-cap category as we talk, I feel there is a lot of froth in that category. So, I would strongly recommend at this point of time to judicially invest their money or if you have made a lot of money there, start booking profits in that category because in that category I can see that a lot of interest is building up right now.
Which are the alternatives to the equity savings category? If somebody wants to put in money in equity savings, what are the better funds to stay invested in or put fresh money in?
TARUN BIRANI: As I told you, I am a big fan of reducing the dilution in the portfolio. So, one can look at a 25% pure equity allocation, one can go with a pure index option on the 25% of the portfolio, one can look at 25 to 30% into a dynamic asset allocation category which has an option to go from 0 to 100% and balance could be looked at into a mix of arbitrage and debt category. That could be a better allocation if one is able to manage that.
So, you are not advocating or not advising even a single equities savings fund any which case?
TARUN BIRANI: I feel it's a high expense structure.
What about arbitrage? Are there a couple of funds that you believe are good arbitrage funds?
TARUN BIRANI: I think the entire market of arbitrage funds, the returns have been more or less in line. There would be hardly 20-30 basis point plus and minus returns. So, one can look at any of the fund houses in the arbitrage category, maybe the top 10, given 10-20 basis point plus minus. So, in that category based on the current environment, one can select the arbitrage fund, and maybe one should be very careful about the six-month horizon. That is very critical.