 "FUND PICK: Axis Long Term Equity Fund")
Launched in December 2009, Axis Long Term Equity Fund is an equity-linked savings scheme (ELSS). Retail investors can look at ELSS to avail tax benefits as funds under this category are eligible for a deduction up to an investment of Rs 1.5 lakh under Section 80C of the Income Tax Act.
The fund has been ranked CRISIL Fund Rank 1 (top 10 percentile) for the past nine quarters within CRISIL Mutual Fund Rankings. The fund’s quarterly average assets under management (AUM) grew 16 times from Rs 126 crore in September 2011 to Rs 2,055 crore in September 2014, while the category’s AUM grew 1.4 times. Jinesh Gopani has managed the fund since April 1, 2011.
The fund intends to generate income and long-term capital appreciation from a portfolio of equity and equity-related securities. It can invest up to 20 per cent in debt and money market instruments. The fund intends to invest in companies with strong growth and a sustainable business model, across diverse market capitalisation, industries and sectors.
Performance
The fund has consistently outperformed its benchmark and the category (see chart) across different time frames. An investment of Rs 1 lakh in the fund since its inception would have appreciated to Rs 2.85 lakh as on January 6, 2014. A similar amount invested in the category and the benchmark would have yielded Rs 2.03 lakh and Rs 1.55 lakh, respectively, during the period.
A monthly systematic investment plan (SIP) of Rs 1,000 for a period of three years would grow to around Rs 63,925, delivering an annualised return of 42.99 per cent as on January 6. A similar investment in the benchmark would have grown to Rs 49,047 (annualised return of 22.12 per cent). Over the three-year period ended January 6, the fund’s Sharpe ratio was 2.48, compared to 1.75 of the benchmark. A higher Sharpe ratio signifies higher risk-adjusted returns.
Portfolio analysis
The fund has dynamically managed its portfolio over the three years ended November 2014. It increased its exposure to the banking sector from 13.84 per cent in December 2013 to an average of 18.50 per cent in 2014. CNX Bank Index outperformed S&P 200 by 23.84 per cent during December 2013 to November 2014. While it reduced its exposure to consumer non-durables from 6.26 per cent in November 2013 to 0.84 per cent in November 2014, it increased its exposure in the auto ancillaries sector to 6.46 per cent from 3.18 per cent in the same period. The fund manager captured the market movement as sectoral representative indices the CNX Auto outperformed the CNX FMCG and S&P BSE 200 by 43.87 per cent (absolute returns) and 13.18 per cent, respectively, during this period. Overweight exposure (9.75 per cent average) to pharmaceuticals also helped; CNX Pharma Index gave 12.08 per cent (annualised) excess returns over the S&P BSE 200 in the past three years.
At the stock level, the fund has kept major exposure to large cap stocks such as HDFC Bank, HDFC, ICICI Bank, Kotak Mahindra Bank, Tech Mahindra and Larsen & Turbo, which have surpassed S&P BSE 200 returns by 7-21 per cent over the past three years. The fund has kept average 33 per cent exposure to small and mid-cap stocks such as PI Industries, Eicher Motors, Symphony and Motherson Sumi Systems over the last three years, which led to the out-performance.
The fund has held a concentrated portfolio at the stock level compared to the category. Over the past three years, the fund held an average 40 stocks compared to the category’s 50. Its top 10 holdings formed 47 per cent of the portfolio as against the category’s 43 per cent. However, the fund has stuck to the restriction of not investing more than 10 per cent in any company during this period.
The fund has been ranked CRISIL Fund Rank 1 (top 10 percentile) for the past nine quarters within CRISIL Mutual Fund Rankings. The fund’s quarterly average assets under management (AUM) grew 16 times from Rs 126 crore in September 2011 to Rs 2,055 crore in September 2014, while the category’s AUM grew 1.4 times. Jinesh Gopani has managed the fund since April 1, 2011.
The fund intends to generate income and long-term capital appreciation from a portfolio of equity and equity-related securities. It can invest up to 20 per cent in debt and money market instruments. The fund intends to invest in companies with strong growth and a sustainable business model, across diverse market capitalisation, industries and sectors.
Performance
The fund has consistently outperformed its benchmark and the category (see chart) across different time frames. An investment of Rs 1 lakh in the fund since its inception would have appreciated to Rs 2.85 lakh as on January 6, 2014. A similar amount invested in the category and the benchmark would have yielded Rs 2.03 lakh and Rs 1.55 lakh, respectively, during the period.
A monthly systematic investment plan (SIP) of Rs 1,000 for a period of three years would grow to around Rs 63,925, delivering an annualised return of 42.99 per cent as on January 6. A similar investment in the benchmark would have grown to Rs 49,047 (annualised return of 22.12 per cent). Over the three-year period ended January 6, the fund’s Sharpe ratio was 2.48, compared to 1.75 of the benchmark. A higher Sharpe ratio signifies higher risk-adjusted returns.
Portfolio analysis
The fund has dynamically managed its portfolio over the three years ended November 2014. It increased its exposure to the banking sector from 13.84 per cent in December 2013 to an average of 18.50 per cent in 2014. CNX Bank Index outperformed S&P 200 by 23.84 per cent during December 2013 to November 2014. While it reduced its exposure to consumer non-durables from 6.26 per cent in November 2013 to 0.84 per cent in November 2014, it increased its exposure in the auto ancillaries sector to 6.46 per cent from 3.18 per cent in the same period. The fund manager captured the market movement as sectoral representative indices the CNX Auto outperformed the CNX FMCG and S&P BSE 200 by 43.87 per cent (absolute returns) and 13.18 per cent, respectively, during this period. Overweight exposure (9.75 per cent average) to pharmaceuticals also helped; CNX Pharma Index gave 12.08 per cent (annualised) excess returns over the S&P BSE 200 in the past three years.
At the stock level, the fund has kept major exposure to large cap stocks such as HDFC Bank, HDFC, ICICI Bank, Kotak Mahindra Bank, Tech Mahindra and Larsen & Turbo, which have surpassed S&P BSE 200 returns by 7-21 per cent over the past three years. The fund has kept average 33 per cent exposure to small and mid-cap stocks such as PI Industries, Eicher Motors, Symphony and Motherson Sumi Systems over the last three years, which led to the out-performance.
The fund has held a concentrated portfolio at the stock level compared to the category. Over the past three years, the fund held an average 40 stocks compared to the category’s 50. Its top 10 holdings formed 47 per cent of the portfolio as against the category’s 43 per cent. However, the fund has stuck to the restriction of not investing more than 10 per cent in any company during this period.