GEMGAZE

November 2017

The consistent performance of all five funds in the November 2016 GEMGAZE is reflected in all the funds holding on to their esteemed position of GEM in the November 2017 GEMGAZE.

Birla Sun Life Tax Plan Gem

Launched in 1999, the Rs. 633 crore Birla Sun Life Tax Plan is one of the oldest ELSS funds in the industry. Currently, large caps account for 39% of the portfolio. Portfolio allocations show the fund to be more small and mid-cap oriented than its peers, with a 61.37% allocation to small and mid-cap stocks. With 53 stocks and the top 5 holdings accounting for 32.8%, the fund looks well-diversified. The fund invests 47.92% in the top three sectors, i.e. automobile, finance and services. The fund's investment strategy focuses on a diversified and high-quality portfolio, with parameters such as capital ratios and balance-sheet strength used to judge quality. It uses a combination of top-down and bottom-up approaches to take sector/stock positions. The fund avoids highly leveraged plays and offers superior growth opportunities.  After a bad patch from 2008 to 2010, Birla Sun Life Tax Plan has made a big comeback in the last five years, with a particularly good run since 2014. In spite of getting hit in the bear market situations a few years ago, it maintained a consistent growth. Since inception, this mutual fund has managed to give a very impressive return of 20.72% along with displaying a very consistent performance. In the past one year, the fund has earned a return of 27.89% as against the category average of 24.96%.  The expense ratio is 2.57% and turnover ratio is 62%.

Franklin India Taxshield Fund Gem

Launched in April 1999, the Rs. 3,367 crore Franklin India Taxshield Fund is one of the oldest ELSS funds in the industry with a proven track record in bull and bear phases. This ELSS fund’s strategy has been to buy quality large caps or emerging large caps at a reasonable price, even in a category crowded with multi-cap funds. Currently, large caps account for 81% of the portfolio. A large-cap oriented fund with a bottom-up investment strategy, this fund always stays fully-invested. The most distinctive feature of the fund's performance history is its ability to do better than its peers when markets crash. It fell only 15.19% as compared to the category average of 23.82% in 2011. But in the next year it slightly lagged behind its peers in terms of performance. The fund's long term returns are attractive, with a trailing five year return of 21.48% and it is ahead of its benchmark. Globally, Franklin Templeton is known for its stock selection. The Franklin India Taxshield Fund adopts the value investment philosophy. The fund waits for attractive price before investing in a share. The fund focuses on big companies which have potential to grow the business. The fund is backed by a strong research team. Anand Radhakrishan’s disciplined investment approach and a strategy that jelled well with his skill-sets has yielded desired results for this fund under his watch from April 2007 to April 2016. However, the fund went through some fundamental changes last year such as change in the manager and investment strategy. It is now helmed by Lakshmikanth Reddy, who joined the fund on May 2016 and has been managing this fund since then. Although R. Janakiraman is the named comanager here, Reddy is the primary manager. The change in the fund’s strategy is significant, too. While earlier it had a more definite mandate of investing around 70% in large-cap stocks and 30% in small/mid-cap stocks, it is now managed with a flexicap approach, which enables the manager to invest without paying heed to the benchmark index, market cap, or any specific style of investing. The change in the strategy is largely to align it with Reddy's skill-sets and to capture wider range of investment opportunities in the fund. Although the investment team has a reasonably good track record in running flexicap strategies, which is positive, it should be noted that it will also change the fund’s risk/reward profile going ahead. Further, the changes here have made the fund’s past track record less relevant. With 60 stocks and the top 5 holdings accounting for 26.52%, the fund looks well diversified. The fund invests 54.96% in the top three sectors, i.e. finance, automobile, and technology. Since inception the fund has given returns of around 25%. In the past one year, the fund has earned a return of 18.19% as against the category average of 24.96%. The expense ratio is 2.37% and turnover ratio is 26%. 

ICICI Prudential Long-term Equity Fund Gem

At Rs. 4753 crore, ICICI Prudential Long-term Equity Fund is one of the largest ELSS funds in the industry. Currently, large caps account for 55% of the portfolio. With 49 stocks and the top 5 holdings accounting for 22.13%, the fund looks well diversified. The fund invests 52.21% in the top three sectors, i.e. finance, energy and healthcare. The fund is valuation-focused and the portfolio is constructed around stocks across sectors and market-capitalisation ranges, based on cheaper valuation and reasonable growth expectations. Expensive stocks which cannot be explained by valuation tools are avoided. A fund which has outpaced its benchmark over not one but three different market cycles, it has beaten its benchmark in 13 of the last 15 years. This is a rare ELSS fund that has managed to stay one step ahead of the benchmark on a trailing one-, three-, five- and ten-year basis, while also beating the category over these periods. The fund's investment strategy typically delivers outsized returns in the beginning stages of a bull market when sector rotation is in vogue. It trails when markets are overheated. It also works well in containing losses when bears are in control. The value style of stock-picking has suffered setbacks in the last five years but seems to be back on the saddle in the last one year or so. In the past one year, the fund has earned a return of 14.48% as against the category average of 24.96%. The expense ratio is 2.32% and turnover ratio is 181%. 

Invesco India Tax Plan Gem

With a corpus size of Rs. 481 crore, Invesco India Tax Plan is one of the smallest schemes in its category, but it packs in quite a punch. The fund invests across market capitalisation and sectors and spreads its assets over 35 stocks without being overly diversified and the top 5 holdings constitute 37.14%. 57.03% of the assets are invested in the top three sectors, finance, automobile, and energy. Even though the fund currently has a large cap bias with 82% allocation, it has not been hesitant about being heavily invested in smaller companies. In the past too, the mid-cap and small-cap allocation have been high. Its relatively small size makes an effective mid-cap strategy viable. The one-year return is 23.7% as against the category average of 24.96%. The year-to-year returns of this fund show it to be equally good at navigating both bull and bear markets, which is a hallmark of this fund. It managed to contain downside to levels much lower than its benchmark during 2008 and 2011 and has outpaced it by big margins both in 2010 and 2014. The last one year has seen the fund outpace its benchmark, but it slightly lagged behind its category. This could be due to its higher large-cap tilt in a category that is largely multi-cap-focused. This fund is a good choice for investors who are looking for a conservative approach to tax planning. Despite its relatively short history, the fund has consistently delivered returns for the investors. A fund that has managed to beat its benchmark through markets ups and downs in seven out of the eight years since launch, the fund prefers quality businesses with healthy growth prospects. But it is careful about not going overboard on valuations. It does not take tactical cash or sector calls. Stock picking has been the key for success of this fund. The expense ratio is 2.47% and the portfolio turnover ratio is 43%.

DSPBR Tax Saver Fund Gem

Launched in 2007, DSPBR Tax Saver Fund has a fund corpus of around Rs 3216 crore. It has a growth-oriented multi cap portfolio with 73% of the corpus in large cap stocks. There are 68 stocks in the portfolio. The top 5 holdings constitute 21.24%.56.16% of the assets are invested in the top three sectors, finance, energy and construction. This fund has outperformed its benchmark in eight out of nine years since launch and its peers in seven of those years. The fund is not wedded to any particular style and follows a diversified approach to select stocks. Though multi-cap by mandate, the fund has been quite large-cap stock oriented in the last five years. The fund also takes tactical calls to capitalise on market trends and opportunities. The fund's margin of outperformance relative to the category and benchmark has widened in the last one year to over 6 percentage points. On a three- and five-year basis, its annualised returns are over 7 percentage points and 3 percentage points ahead of the benchmark and category, respectively. It is creditable that this has been managed with a distinct large-cap tilt relative to the category. The track record suggests that the fund has proved better at navigating bull runs and volatile phases in the market than bear phases. In 2008 and 2011, the fund lost slightly more than the category. It has delivered sizeable outperformance in 2012 and 2016. However, as the fund has seen a change in manager in 2015 and also adopted a higher allocation to large-cap stocks, past performance may not be a great guide to the future. DSP BR Tax Saver fund has offered 20.55% returns for the last one year as against the category average of 24.96%. The expense ratio is 2.51% and the portfolio turnover ratio is 84%.