Mutual Funds

HDFC Children’s Gift Fund: Proving its mettle over the long term

Dhuraivel Gunasekaran | Updated on July 14, 2019 Published on July 14, 2019

The fund has clocked a CAGR of 17 per cent over the last decade

Children’s plans offered by mutual funds are hybrid funds investing in the mix of equity and debt assets. They have a lock-in of at least five years or till the child attains 18 (whichever is earlier).

These funds allow investment only in the name of a minor child — less than 18 years old — on the date of the investment. The applicant can be the parent, step-parent, grand-parent, adult relative or friend. Few AMCs allow trusts and corporate entities also to invest in the child’s name.

HDFC Children’s Gift is one of the best-performing funds in the category, investing 65-75 per cent in equity and rest in debt papers. The fund has clocked a compounded annualised return (CAGR) of 17 per cent over the last 10 years. The peer schemes in the category such as ICICI Pru Child Care - Study Plan and UTI Child Care investment plan delivered a CAGR returns of 15 and 11 per cent respectively during the same period.

This fund can be a long-term bet for investors who want to save for their child’s higher education, a dream wedding or to secure a good lifestyle. The fund provides personal accident insurance to the guardian. The cover, provided to the parent or legal guardian and not to the child, is 10 times the value of the outstanding units, subject to a maximum amount of ₹10 lakh per unit holder. The insurance premium is borne by the AMC. The compensation is payable to the child.

Performance

 

The fund has been an outperformer among peers across most time-frames. It has delivered CAGR returns of 6, 11, 11 and 15 per cent over one-, three-, five- and seven-year time-frames respectively. The category generated 4, 9, 9 and 12 per cent returns respectively, during these periods.

The fund has not only delivered higher returns during market rallies but also capped losses well during market downturns. During the bear markets of 2011 and 2015, for instance, the fund proved its mettle by outperforming the category by 10 and 3 per cent respectively. In the bull phases too (2012 and 2017), it outpaced its peers by 7 per cent and 5 per cent respectively. A relatively higher exposure to mid-cap stocks in its equity portfolio, spicing up returns, has helped the fund top the charts.

With a mix of 70:30 respectively in debt and equity (on an average over the last three years), the fund has maintained a well-balanced portfolio. On the equity side, the fund favours businesses with superior growth prospects and good management, at a reasonable price. The large- versus mid- and small-cap ratio stood at 60:40 as per the latest portfolio.

On the debt side, the fund takes calls based on the interest rate movement in the market. Over the last one year, it increased its exposure to corporate debt, while cutting its allocation to G-Secs. Currently, the fund has invested 19 per cent and 7 per cent of assets in corporate bonds and G-Secs respectively.

In the AA+ category of bonds, the fund has about 4.8 per cent exposure to papers of Axis Bank, Hero fincorp and SBI. The average maturity of portfolio as of June 2019 was 2.6 years.

Published on July 14, 2019

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.