According to ICICI Prudential AMC's Senior Fund Manager Ihab Dalwai, Indian markets trading near elevated long-term averages make relying on single asset classes risky. As reported by The Economic Times, Dalwai advocates for a flexible asset allocation strategy that actively shifts capital between equities, debt, and commodities over the next three years. This dynamic approach aims to achieve better risk-adjusted returns by adapting to market conditions for smoother outcomes, with high return dispersion making the real opportunity over the next three years lie in this flexible framework rather than static exposure.
The Active Asset Allocator Long-Short strategy differs significantly from existing Balanced Advantage Funds and Multi-Asset Funds co-managed by Dalwai. According to The Economic Times, the SIF structure enables deployment of wider range of derivative-based strategies that generate returns from both directional market participation and relative opportunities across asset classes. The strategy dynamically allocates across equities, debt, commodities, InvITs and derivatives, with flexibility to recalibrate exposures based on valuations, macros and risk-adjusted opportunities. As Dalwai explains, while BAFs and Multi-Asset Funds primarily manage net exposure through hedging and dynamic allocation, the SIF structure allows deployment of a wider range of derivative-based strategies, enabling the portfolio to potentially generate returns from relative opportunities across asset classes and market conditions.
As reported by The Economic Times, equity valuations have corrected in pockets where expectations are low, with such opportunities increasing over the last 1-2 years. Fixed income has become relatively more attractive after sharp repricing in global rates, while commodities, especially precious metals, performed well due to dollar devaluation. However, commodities, especially precious metals, have currently paused their upward trend due to rising rates in the US. Dalwai emphasizes that the opportunity today lies in actively shifting between these asset classes rather than remaining concentrated in one asset class for the next three years, with the goal of creating a more adaptive portfolio that seeks smoother outcomes across cycles while maintaining a disciplined buy low, sell high philosophy.
According to The Economic Times, the current asset allocation stance is driven by rising rate environment impacts on yield-oriented assets like InvITs, where selective allocation becomes important rather than broad-based views. Within the midcap universe, Dalwai sees potential opportunities in specific sectors for a 3-5 year perspective, though specific sector preferences were not detailed in the report. The framework emphasizes being 'invested the right way at the right time' across different market cycles, with the biggest macro variables driving current asset allocation including the rising rate environment and its impact on yield-oriented assets like InvITs.
