The Hindu Business Line : 3-year scorecard: Tax-saving schemes post 48% return

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3-year scorecard: Tax-saving schemes post 48% return

Nilanjan Dey

Birla Sun Life enters top-5 in asset under management rankings

If you had invested in tax-planning funds three years ago, you would have seen that the average performer among them has given you about 48 per cent. Not a small feat, considering that banking funds, which constitute the top-performing segment, have delivered just a shade better – 50 per cent or so during this period.

While their modest sizes indicate that not everybody in the investor fraternity has appreciated the category, tax-planning funds are actually quite diversified. Their portfolios are considerably broad-based, often made up of stocks from across the market-cap range.

What makes these funds so unique, and we have stressed on this point time and again, is that an investor needs to stay locked in for three years. Clearly, even the most uninspiring fund manager should be able to utilise a three-year stretch prudently.

Asset base

Despite all this, the small AUMs (assets under management) are quite an embarrassment. We will not specify any of the microscopic figures here, they are far too humble to be mentioned. However, we will simply point out that the AUM of the entire funds industry stands at roughly Rs 5.6 trillion.

A compilation by rating major Crisil underlines that the total AUM represents a marked rise of more than Rs 800 billion over the September-end AUM (Rs 4.8 trillion). That, dear reader, is a 17 per cent month-on-month growth. All the 30-odd fund houses managed to record an increase in their AUM during the month.

How did this happen? Mr Krishnan Sitaraman, Head – Fund Services and Fixed Income Research, Crisil, has this quote to share: “The increase in AUM can be attributed to the rise in the stock market, large corpus raised by new fund offerings, lower redemptions and availability of liquidity in the banking industry, which saw short-term fund flows into liquid schemes. Investors, who withdrew money from equity schemes fearing a sharp correction when the benchmark indices were scaling new highs, typically reinvested these funds into liquid and liquid-plus plans.”

That explanation is quite a pointer, we think. Incidentally, the country’s No 1 fund house, Reliance Mutual Fund, retained its position, its AUM sailing to nearly Rs 800 billion in October. ICICI Prudential MF came second with Rs 5.6 billion and UTI MF came third with Rs 5.2 billion.

The last month’s numbers have undoubtedly conveyed that the order of things is changing. As the rating agency notes, a major entrant into the top-five roster is Birla Sun Life MF, which ended the month with Rs 3.4 billion. And that exceeded Franklin Templeton MF’s score. For the record, FT had an asset base of Rs 3.2 billion.

New Norms

Investors in mutual funds need to know that the industry will now have to contend with a few norms that have lately crept in. One, the quota for funds in equity offers stands hiked. This, it is felt, will lead to greater ‘retail investments’ in the stock market. Two, the market regulator has said that the duration of short-term investments by funds in bank deposits to 182 days (up from 91 days). This, it may be noted, will allow more room for fund managers to get better options.

At the end, did you know that Goldman Sachs has been okayed by the FIPB to start an AMC in India? Or that Pioneer will soon be in India, courtesy its joint venture with BoB Mutual Fund? One is sure that more will follow in the days ahead.

Feedback may be sent to Nilanjan@thehindu.co.in