Equity linked saving schemes (ELSS) are diversified equity funds that come with the dual advantage of wealth-building potential and tax-saving. These funds come with a lock-in period of three years which is the lowest as compared to other tax saving instruments. The lock-in period allows the fund manager to take more informed decision as they can concentrate on picking long term bets.

Axis Long Term Equity Fund is one such ELSS that aims to generate income and capital appreciation from a diversified portfolio of predominantly equity and equity-related instruments.

Launched in December 2009, the fund has a corpus of Rs 20,425 crore which makes it the largest scheme in the category.

The fund is managed by Mr Jinesh Gopani (since April 2011) who has over 18 years of experience in the financial markets.

Graph 1: Growth of Rs 10,000 if invested in Axis Long Term Equity Fund 5 years ago

Data as on October 16, 2019
(Source: ACE MF)

If you had invested Rs 10,000 in Axis Long Term Equity Fund five years back on October 16, 2014, it would now be worth Rs 20,022 (as on October 16, 2019). This translates into a compounded annualised growth rate of 14.89%. In comparison, a simultaneous investment of Rs 10,000 in its benchmark S&P BSE 200 – TRI would have grown to Rs 16,132 (a CAGR of 10.04%). As can be seen in the chart alongside, the fund has generated remarkable lead over the benchmark in the last five years.

Graph 2: Axis Long Term Equity Fund year-on-year performance

*YTD as on October 16, 2019
(Source: ACE MF)

Launched in December 2009, Axis Long Term Equity Fund has a track record of almost a decade. The year-on-year performance comparison of the fund vis-a-vis its benchmark S&P BSE 200 – TRI shows that the fund outperformed the index in all the last nine calendar years (barring CY 2016). The outperformance in most of the years has been with a noticeable margin. In the current year too, the fund has continued with its streak of outpacing the benchmark.

Table 1: Axis Long Term Equity Fund performance vis-à-vis category peers

Scheme Name Corpus (Cr.) 1 year (%) 2 year (%) 3 year (%) 5 year (%) Std Dev Sharpe
Mirae Asset Tax Saver Fund 2,465 4.76 13.64 19.78 NA 13.54 0.15
Motilal Oswal Long Term Equity Fund 1,500 -5.07 7.13 15.08 NA 14.66 0.07
JM Tax Gain Fund 33 0.89 9.49 14.54 16.22 14.94 0.08
Taurus Tax Shield Fund 64 0.08 10.56 13.78 13.55 13.12 0.06
Axis Long Term Equity Fund 20,425 3.77 12.91 13.50 18.17 13.70 0.10
Invesco India Tax Plan 912 1.06 11.22 13.48 17.11 13.03 0.07
Tata India Tax Savings Fund 1,919 1.21 9.71 13.44 13.97 15.23 0.06
IDFC Tax Advt(ELSS) Fund 1,994 -5.19 9.14 13.41 15.75 15.91 0.03
Kotak Tax Saver Scheme 947 3.41 8.32 13.29 16.46 13.36 0.04
Principal Tax Savings Fund 389 -5.05 7.45 13.21 14.63 15.81 0.00
DSP Tax Saver Fund 5,841 1.02 7.67 13.08 16.14 14.12 0.05
Canara Rob Equity Tax Saver Fund 965 5.41 11.47 12.76 13.43 13.67 0.07
Aditya Birla SL Tax Relief '96 9,129 -2.59 9.91 12.74 17.32 13.80 0.02
LIC MF Tax Plan 244 1.90 10.38 12.72 13.87 13.43 0.07
Quant Tax Plan 10 -1.10 6.70 12.62 18.43 14.04 0.00
PGIM India LT Equity Fund 353 0.57 8.97 12.37 NA 13.15 0.03
L&T Tax Advt Fund 3,284 -5.76 6.41 12.23 14.27 13.47 0.01
Essel Long Term Advantage Fund 58 1.56 7.75 12.19 NA 13.78 0.03
ICICI Pru LT Equity Fund (Tax Saving) 6,161 2.98 9.01 11.36 14.18 12.86 -0.01
BOI AXA Tax Advantage Fund 243 -10.07 7.62 11.22 13.19 17.66 0.04
S&P BSE 200 – TRI 2.39 10.21 12.84 12.57 12.91 0.05

Returns are on a rolling basis and in %, calculated using Direct Plan – Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on October 16, 2019
(Source: ACE MF)

*Please note, this table only represents the best performing funds based solely on past returns and is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. Past performance is not an indicator for future returns. The percentage returns shown are only for indicative purposes.

Axis Long Term Equity Fund performed exceedingly well and outpaced the benchmark and average category peers across rolling periods.

The fund stands among the top performers across rolling periods and is also a category topper on a five year rolling period basis. The other top performers within the category include Mirae Asset Tax Saver FundMotilal Oswal Long Term Equity FundJM Tax Gain Fund and Taurus Tax Shield Fund.

In terms of risk-return parameters, the fund registered lower volatility as compared to average category peers but higher volatility as compared to the benchmark. However, it has rewarded investors with superior risk-adjusted returns.

Investment strategy of Axis Long Term Equity Fund

Categorised as ELSS, Axis Long Term Equity Fund is mandated to hold minimum 80% of its assets in equity & equity related instruments. The fund has the flexibility to invest across market capitalisation.

It seeks to select stocks of strong growth companies having sustainable business models and competitive advantage. The fund utilises bottom-up stock selection process and employs a fundamentals based research process to analyse the appreciation potential of each stock in its universe.

The scheme endeavours to remain fully invested in equity and equity related instruments at all times.

Graph 3: Axis Long Term Equity Fund portfolio allocation and market capitalisation trend

Holding (in %) as on September 30, 2019
(Source: ACE MF)

Axis Long Term Equity Fund invests across market capitalisation and aims to remain fully invested in equities. The fund has a large cap bias where it holds around 65% of its assets while it also has a significant exposure in mid caps. It allocates 20-30% of its assets in mid caps, whereas, it allocates up to 8% in small caps. Rest of the holdings is maintained in the form of cash along with a marginal allocation to debt instruments.

Graph 4: Axis Long Term Equity Fund top portfolio holdings

Holding (in %) as on September 30, 2019
(Source: ACE MF)

Axis Long Term Equity Fund held a compact portfolio of 33 stocks as on September 30, 2019. The top 10 stocks constitute a major 65.2% of the total holdings and are mainly concentrated towards banking and finance. Bajaj Finance has the highest allocation of 9.5%, closely followed by Kotak Mahindra Bank at 8.8%, HDFC Bank at 7.7% and Pidilite Industries at 7.5%. Rest of the stocks in the top 10 holding have allocation in the range of 4-7%.

In terms of sector wise holdings, the fund has the highest exposure to Finance at 23.3% and Banks at 19.1%. This is followed by Infotech (12.9%), Chemicals (7.5%) and Retail (6.7%). Consumption, Engineering, Power, Auto ancillaries and Media & entertainment are the other prominent sectors in the portfolio.

Top contributors

Among the stocks in the portfolio, Bajaj Fiannce contributed the most to the fund’s return in the last one year with a weighted return of 4.3%. Kotak Mahindra Bank, Pidilite Industries, HDFC Bank, Avenue Supermarts and Info Edge (India) were the other top contributors to the portfolio gains. These stocks are the part of the fund’s top 10 holdings.

On the other hand stocks like Motherson Sumi Systems, Eicher Motors, Gruh Finance, Bandhan Bank and Tata Consultancy Services eroded some of its gains in the last one year.

Suitability of Axis Long Term Equity Fund

Axis Long Term Equity Fund allocates majority of its portfolio in selected stocks diversified across market capitalisation and sectors. Its compact portfolio style allows the fund manager to take high conviction bets on stocks having potential to generate higher returns. However, the concentrated portfolio may lead to high volatility, if any of the selected stocks come under pressure. As ELSS come with a lock-in period, investors do not have an exit option in case the scheme underperforms during that period. Such funds are suitable only for aggressive investors having moderately high risk appetite, along with an investment horizon of 5 years or more.

Note: This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

This article first appeared on PersonalFN here.

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