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The ELSS category offers tax benefits to investors, as these funds are eligible for a deduction up to an investment of Rs 1 lakh under Section 80C of the Income Tax Act.
However, investors must also refer to the latest announcements in the Union Budget on February 28, for any changes in tax rules.
The fund’s quarterly average assets under management (AUM) have grown 1.7 times from Rs 137 crore in December 2011 to Rs 369 crore in December 2012. As against this, the category AUM has grown 12 per cent during the same period.
Performance
The fund has outperformed both its benchmark and category over one, two and three years. Over a longer timeframe of three years, the fund has given annualised return of almost 13 per cent vis-à-vis 6.7 per cent of the category and five per cent of the benchmark (BSE 200).
A monthly systematic investment plan (SIP) of Rs 1,000 for a period of three years would grow to around Rs , delivering an annualised return of 10.52 per cent as on February 18, 2013. A similar investment in the benchmark would have grown to Rs 38,683 (annualised return of 4.81 per cent).
Over a three-year period, the fund has generated higher mean return at a lower risk (volatility) than the category and the benchmark. This is measured by the Sharpe ratio of the fund (higher the better), which stood at 0.63 vis-à-vis the category’s 0.14 during the same period. The fund also generated significant excess returns over its benchmark as shown by its Jenson’s alpha, which stood at 10.5 per cent compared to the category’s two per cent in the same period.
Axis Long Term Equity Fund intends to generate income and long-term capital appreciation from a portfolio of equity and equity-related securities. The fund can invest up to 20 per cent in debt and money market instruments.
The fund intends to invest in companies with strong growth and sustainable business model. It aims to invest flexibly across market capitalisation, industries and sectors.
Portfolio analysis
The fund has held a concentrated portfolio compared to the category at the stock level. Over the past three years, the fund held an average 41 stocks compared to the category’s 48. Its top 10 holdings formed 51 per cent of the portfolio, as against the category’s 45 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 dynamically managed its equity allocation. Between February 2010 and September 2010 when the BSE-200 Index rose 22 per cent, the fund increased its equity exposure to 92 per cent from 77 per cent. However, during the subsequent bear phase when BSE 200 fell 27 per cent (between September 2010 and December 2011), the fund maintained an average equity exposure of 89 per cent. Thereafter, the fund maintained an average equity exposure of 95 per cent to capture the returns of BSE 200, which rose 33 per cent (from December 2011 to January 2013).
Within equities, the fund has 70 per cent of its equity exposure to CRISIL-defined large cap stocks over the past three years. While this shows that the fund has largely invested in large cap stocks, it has dynamically managed its large cap exposure. Between November 2010 and July 2011, this exposure was around 80 per cent. Subsequently, it was reduced to 64 per cent. In the three-year period ended January 2013, the fund is overweight on consumer non-durables, finance, pharmaceuticals and automobile sectors, compared to the benchmark. These sectors contributed to the fund’s outperformance, as these have generated returns in excess of nine per cent over the benchmark. Also, being underweight on ferrous metals compared to the benchmark helped restrict the downside, as the sector has given negative return of 15 per cent (CNX Metal).
CRISIL Research
