Birla Sun Life MIP II - Savings 5: Invest

With the equity markets turning quite volatile, debt seems to be a safer avenue to bet on.

The possibility of interest rate cuts, even if it is minimal, could help bond prices rally reasonably. Hence, time may be ripe for investors to look at monthly income plans.

Investors can consider buying the units of Birla Sun Life MIP II – Savings 5(Birla Savings), which has a proven track record of over nine years. The fund, which invests largely in debt instruments, with a small portion allocated to equity, manages to ride the interest rate cycle well.

By actively managing the maturity profile of its debt portfolio and investing in highly rated instruments, Birla Savings has delivered top quartile returns over the years.

Over one-, three- and five-year timeframes, the fund has managed to equal or outperform its benchmark – Crisil MIP Blended Index.

The level of outperformance has been to the extent of 1-2 percentage points.

This may appear a low margin, but the scheme does not take as significant an equity exposure as many other MIPs. Hence, it has managed to stay ahead almost entirely due to appropriate management of its debt component. This makes the fund less risky too.

Investors can opt for the dividend option, if they require regular cash flows from their investments.

It must be noted however, that in general MIPs declare dividends depending on the market conditions and available surplus and is not an absolute certainty.

For investors who want a safe avenue with reasonable returns on their investments, Birla Savings may be an appropriate choice where small sums may be parked as part of debt holding in the overall portfolio.

Portfolio and strategy

Birla Savings, in the past, used to invest largely in non-government securities. But over the past couple of years, it has substantially increased exposure to government securities. Currently, it has invested in AAA rated instruments to the tune of over 44 per cent of its portfolio.

Government securities account for over 16 per cent, while the share of AA rated instruments is about 20 per cent.

The average maturity has increased over the past couple of years and is over 3 years now, which suggests active management of the debt portfolio so as to improve yields. The yield to maturity of its June portfolio is a healthy 8.05 per cent.

Investments are in corporate debt, floating rate notes, debentures and structured obligations, apart from government securities.

The companies where Birla Savings has invested include PFC, IDBI Bank, FCI, Sundaram Finance, Reliance Utilities and Power, and ICICI Bank among others.

The equity portion has always been restricted to less than 10 per cent of the overall portfolio.

Exposure to individual stocks is highly diffused. Some quality mid-caps figure in the portfolio, though large-caps have a higher presence.

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