Balanced Advantage and Dynamic Asset Allocation Funds

A Balanced Advantage Fund (BAF), also called Dynamic Asset Allocation, moves its equity allocation up and down according to a model — typically raising equity when markets look cheap on valuation measures and cutting it when they look expensive.

The goal is a smoother ride

These funds are built to reduce drawdowns, not to maximise return. In a strong bull market a BAF will usually lag a pure equity fund, because it will have been trimming equity as valuations rose. That is the design working, not failing.

Models differ a lot

Two BAFs can behave very differently depending on whether the model is driven by price-to-earnings, price-to-book, or trend signals, and how wide the equity band is. Read the scheme document — the label tells you less than usual here.

Who they suit

• Investors who want equity exposure but would panic-sell in a deep fall.
• Those who want the allocation decision handled inside the fund.
• Most retain equity taxation via derivative hedging — worth confirming per scheme.