Aditya Birla Sun Life Bal Bhavishya Yojna NFO. New kid on the children’s plan block

The new fund offer (NFO) of Aditya Birla Sun Life Bal Bhavishya Yojna is underway and open until February 5, 2019. This child plan, categorised as a solution-oriented plan, is an open-ended scheme with a lock-in for five years or until the child turns 18, whichever is earlier. The idea is for investors to deploy money for the long term to meet the future financial requirements of a child. The fund comes with two options — wealth plan and savings plan. Under the wealth plan, 65-100 per cent of the corpus would be allocated to equity and related instruments, and the rest to fixed income securities and units issued by REITS/InvITs. Under the savings plan, 75-90 per cent of the corpus will be allocated to debt instruments and the rest to equity and REIT/InvIT units.

Strategy

The funds have the option of investing in unlisted stocks and foreign securities too. In effect, the wealth plan with an equity orientation seeks to cater to aggressive investors, while the savings plan, with a debt orientation, seeks to cater to conservative investors. The wealth plan is benchmarked to the S&P BSE 200, while the savings plan is benchmarked to the CRISIL Hybrid 85+15 Conservative Index.

The wealth plan will have a multi-cap orientation and seeks to have a diversified portfolio of quality companies across sectors and market capitalisations, using a bottom-up investment style. The savings plan intends to have an accrual focused portfolio with low duration and high credit profile. Investors are allowed to switch, without exit loads, from wealth to savings plan, or vice-versa, depending on their requirement. Investments can be made in lumpsums or SIPs.

Also, systematic transfer and withdrawal plans are available, subject to lock-in period.

There are already a few schemes in the market in the children’s funds category, including those from HDFC, Axis, ICICI, LIC, SBI, Tata and UTI fund houses. These schemes have a track record, with some doing quite well over the long term. Aditya Birla Sun Life Bal Bhavishya Yojna, being an NFO, is untested yet and has no track record so far. That said, it comes with a couple of differentiators.

One, it allows investment by a wide range of investors, including distant relatives, trusts and corporate entities, as a gift to a child less than 18 years of age. Many children’s funds allow only parents, grandparents and/or legal guardians to invest in the child’s name. Next, unlike many peers, the fund offers two schemes catering to both aggressive and conservative investors, and the flexibility to switch between them.

Open-ended advantage

One grouse with NFOs in the past is that many of them were close-ended, imposing restrictions on the entry and exit of investors with fixed investment windows and tenures after which the investment was redeemed. But Aditya Birla Sun Life Bal Bhavishya Yojna being open-ended, an investor can buy the fund even after the NFO period and choose to hold on even after the lock-in period of five years.

Providing for a child’s future expenses does not necessarily require a children’s plan. This objective can be achieved even with other well-run diversified schemes that do not have lock-ins and provide flexibility to exit anytime in case of sustained under-performance.

That said, the lock-ins imposed by many children’s plans have the utility of requiring investors to hold on for a meaningfully long period — a virtue sometimes necessary for investors to reap the desired rewards.

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