In India, people usually retire at 58-60 years. But you will find many elderly people working out of compulsion. Initially, when people had shorter lifespans, there were fewer options for lifestyles, entertainment, and even lesser aspirations with substantial income. So, the necessity to plan for one’s retirement years was quite non-existent.
However, with changing times, incomes and purchasing power have increased parallel to inflating costs, growing aspirations, and the increase in lifespan makes it imperative for planning for the hay days of life. And depending on your children is the least ideal retirement option.
Retirement planning is one of life’s events that one must start as early as possible. With a goal-based financial plan, one will not have to worry about retirement. Mutual fund houses have lagged for years; however, they have seen, at least the urban office-going community understands the importance of retirement planning now.
So Axis Mutual Fund is also among several fund houses that launched retirement fund, Axis Retirement Savings Fund. Axis Retirement Savings Fund is an open-ended retirement solution-oriented scheme having a lock-in of 5 years or till retirement age (whichever is earlier).
The Scheme offers 3 different Investment Plans according to the age bracket of an individual with respect to the risk-taking ability. Each Investment Plan will be managed as a separate portfolio.
Image 1: 3 Plans under Axis Retirement Savings Fund
(Source: Axis Retirement Savings Fund Product leaflet)
However, most investors still ignore factoring in their retirement as a financial goal during their youth only to realise what a gross mistake this is, when on the brink of retirement. And hence the three variants are being offered as per the age bands so that they can begin investing for their blissful second life.
Table 1: Details of Axis Retirement Savings fund
| Type | An open-ended retirement solution-oriented scheme having a lock-in of 5 years or till retirement age | Category | Special solution-oriented scheme (retirement fund) | ||
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Investment objective of Axis Retirement Savings Fund To provide long-term capital appreciation / income by investing in a mix of equity, debt and other instruments to help investors meet their retirement goals. However, there can be no assurance that the investment objective of the Scheme will be achieved. Investment objectives of Investment Plans under the Scheme are as given below:
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| Investment Plans |
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| Min. Investment | Rs 5,000 and in multiples of Re 1 thereafter | Face Value | Rs 10 per unit | ||
| Plans |
| Options |
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| Entry Load | Dividend Pay-out Facility | Exit Load | Nil | Fund Manager | Mr Jinesh Gopani, Mr R. Sivakumar and Mr Hitesh Das (for Foreign Securities) |
| Benchmark Index |
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| Issue Opens | November 29, 2019 | Issue Closes: | December 13, 2019 | ||
(Source: Scheme Information Document)
How will Axis Retirement Savings Fund allocate its assets?
Under normal circumstances, the asset allocation of the Investment Plans under the Scheme would be as follows:
- Axis Retirement Savings Fund – Aggressive Plan
Under normal circumstances the asset allocation will be:
Table 2a: Asset allocation for Aggressive Plan
| Instrument | Indicative Allocation (% of net assets) | Risk Profile | |
| Minimum | Maximum | High/Medium/Low | |
| Equity & Equity related instruments | 65 | 80 | High |
| Debt & Money Market Instruments | 0 | 35 | Low to Medium |
| Gold ETF | 0 | 10 | Medium |
| Units issued by REITs & InvITs | 0 | 10 | Medium to High |
(Source: Scheme Information Document)
- Axis Retirement Savings Fund – Dynamic Plan
Under normal circumstances the asset allocation will be:
Table 2b: Asset allocation for Dynamic Plan
| Instrument | Indicative Allocation (% of net assets) | Risk Profile | |
| Minimum | Maximum | High/Medium/Low | |
| Equity & Equity related instruments | 65 | 100 | High |
| Debt & Money Market Instruments | 0 | 35 | Low to Medium |
| Gold ETF | 0 | 10 | Medium |
| Units issued by REITs & InvITs | 0 | 10 | Medium to High |
(Source: Scheme Information Document)
- Axis Retirement Savings Fund – Conservative Plan
Under normal circumstances the asset allocation will be:
Table 2c: Asset allocation for Conservative Plan
| Instrument | Indicative Allocation (% of net assets) | Risk Profile | |
| Minimum | Maximum | High/Medium/Low | |
| Equity & Equity related instruments | 20 | 40 | High |
| Debt & Money Market Instruments | 40 | 80 | Low to Medium |
| Gold ETF | 0 | 10 | Medium |
| Units issued by REITs & InvITs | 0 | 10 | Medium to High |
(Source: Scheme Information Document)
What will be the Investment Strategy?
Subject to the Asset Allocation pattern, the investment strategies of the Scheme shall be as under:
Axis Retirement Savings Fund – Aggressive Plan
The Aggressive Plan aims to generate long term capital appreciation by investing primarily in equity and equity related instruments, along with regular income through investments in debt and money market instruments.
Within equities and fixed income, the portfolio would be actively managed to optimize returns within the respective asset class. Investment Plan may also invest in other asset classes like units of Gold ETF or units REITs & InvITs.
Axis Retirement Savings Fund – Dynamic Plan
TheAxis Retirement Savings Fund – Dynamic Planhas a dual objective of generating capital appreciation by investing in equity and equity related securities as well as generating income by investing in debt and money market securities while attempting to manage risk from the market through active asset allocation.
In order to achieve this process, the scheme will follow a top-down and bottom-up strategy.
The top-down process will lead to the active ongoing asset allocation decision between equity and debt and the bottom-up process would lead to the construction of the portfolio using specific securities.
The fund house has built a proprietary in-house quantitative approach for dynamic asset allocation. The quantitative approach looks at equity markets across the following 3 parameters to decide the appropriate allocation to equity:
- Valuation
- Volatility
- Trend
The allocation to debt is the residual number that is arrived at after deciding the equity allocation. The asset allocation decision is reviewed on an ongoing basis and is dynamically linked to movements in market variables.
Specifics of the model
- Valuation is represented by the trailing PE of Nifty 50
- Volatility is represented by the 30-day standard deviation of Nifty 50
- Hi: >17%
- Low: <= 17%
- The trend is represented by 2 variables
- difference between the 90 day and 15 day moving average of the Nifty 50, and
- rate of change of the 90-day moving average of the Nifty 50.
The model is run on a 40 trading-day basis and all the parameters are considered for finalizing the equity allocation. Once the allocation is fixed, it is not changed for 40-trading days till the model is run again.
Equity Allocations recommended by the model
The gross equity exposure will be maintained between 65% to 100% while the net equity exposure is to be maintained between 30% to 100%. The difference between these exposures will be carried out using derivatives. The model has a matrix approach for considering the allocation across the different variables as follows:
Table 3a: Matrix table for equity exposure
(Source: Scheme Information Document)
Fixed Income Allocations recommended by the model
The exposure to debt & money market instruments including cash & cash equivalent will be maintained between 0% to 35%. The model has a matrix approach for considering the allocation across the different variables as follows:
Table 3b: Matrix table for fixed income allocation
(Source: Scheme Information Document)
Once the allocation has been decided, the equity and fixed income portfolios will be constructed on a bottom-up basis.
While constructing the portfolio consisting of:
Equity and equity related Instruments:
The equity allocation will be based on the outcome of the allocation model given above. Once, the allocation is fixed, then the focus would be to build a diversified portfolio of strong growth companies, reflecting the most attractive investment ideas, at all points of time.
The portfolio will be built utilizing a bottom-up stock selection process, focusing on appreciation potential of individual stocks from a fundamental perspective.
The AMC employs a “Fair value” based research process to analyse the appreciation potential of each stock in its universe. The universe of stocks is carefully selected to include companies having a robust business model and enjoying sustainable competitive advantages as compared to their competitors.
The Fund will have the flexibility to invest across the market capitalization spectrum. The fund managers by utilizing a holistic risk management strategy will endeavour to manage risks associated with investing in equity markets.
The Fund has identified the following risks and designed risk management strategies, which are embedded in the investment process to manage these risks
i. Quality Risk – Risk of investing in unsustainable / weak companies.
ii. Price Risk – Risk of overpaying for a company
iii. Liquidity Risk – High Impact cost of entry and exit
iv. Volatility Risk – Volatility in price due to company or portfolio specific factors
v. Event Risk – Price risk due to a company / sector specific or market event
Fixed Income:
The Axis Retirement Savings Fund – Dynamic Plan proposes to invest in a diversified portfolio of high-quality debt and money market instruments to generate regular income. The fund manager will allocate the assets of the scheme taking into consideration the prevailing interest rate scenario & the liquidity of the different instruments.
The portfolio duration and credit exposures will be decided based on thorough research of the general macroeconomic condition, political and fiscal environment, systemic liquidity, inflationary expectations, corporate performance and other economic considerations. The fund manager will keep in mind the yield structure of different asset classes (e.g. the sovereign yield curve and the corporate bond yield curve) as well as the kinks within a particular yield curve (e.g. the different points of the sovereign yield curve) while making investment decisions.
Axis Retirement Savings Fund – Conservative Plan
The Investment Plan seeks to generate regular income through investments in debt and money market instruments, along with capital appreciation through equity and equity related instruments.
Within equities and fixed income, the portfolio would be actively managed to optimize returns within the respective asset class.
The Investment Plan may also invest in other asset classes like units of Gold ETFs or units of REITs & InvITs.
Who will manage the Axis Retirement Savings Fund?
M r Jinesh Gopani and Mr R. Sivakumar would be the designated Fund Managers of the Scheme, while Mr Hitesh Das will handle the Foreign Securities.
Currently, Mr Jinesh Gopani is the Head of Equities at Axis Asset Management Co. Ltd. He has been associated with Axis Asset Management from October 2009.
He holds a bachelor’s degree in commerce
(B. Com) and a degree in Master of Management Studies (MMS) from Bharati
Vidyapeeth Institute of Management Studies and research. He has a work
experience of over 16 years in Equity Research and Fund management.
He worked as a Research Analyst for 2 years with Net worth Stock Broking Ltd,
then joined Emkay Share & Stockbrokers Ltd. as Research Analyst for 4
years. Further, he joined Voyager India Capital Pvt. Ltd. for 2 years as
Research Analyst and Portfolio Manager. Thereafter, he was with Birla Sun Life
Asset Management Company Ltd as a Portfolio Manager for 2 years before joining
Axis Mutual Fund.
Some of the other Equity schemes he manages are Axis Focused 25 Fund, Axis Emerging Series 1 (1400 Days), Axis Emerging Series 2 (1400 Days), Axis Long Term Equity Fund, Axis Multi-cap Fund and Axis Growth Opportunities Fund.
Mr R. Sivakumar holds a B. Tech degree from IIT Madras and PGDM from IIM, Ahmedabad. He has a tremendous work experience of fixed income research.
Currently, he is the Head of Fixed Income & Products at Axis Asset Management Co. Ltd. He has been associated with Axis Asset Management from September 2010. Prior to joining Axis AMC, he has worked with Fortis Investment Management (India) Pvt. Ltd. (previously known as ABN AMRO Asset Management) as a Chief Operating Officer. Some of the previous companies he has worked as a Fund Manager include Sundaram Asset Management Company Ltd besides Fortis Investment Management (India) Pvt. Ltd and worked as a Research Analyst at Zurich Asset Management (India) Private Ltd.
Some of the other Debt schemes he manages are Axis Dynamic Bond Fund, Axis Capital Protection Oriented Fund – Sr. 5, Axis Children’s Gift Fund, Axis Triple Advantage Fund, Axis Dynamic Equity Fund and Axis Equity Saver Fund.
Mr Hitesh Das has to his credit a B. Tech, M. Tech followed by PGDM. He manages investments under ADRs/GDRs and other foreign securities at the fund house.
He has a work experience of over a decade as an Equity Research Analyst, wherein he was associated with Yes Bank as a Risk Analyst for a year. Later he joined Ebusinessware (India) Pvt. Ltd as an Equity Research Analyst for a brief term. Thereafter he joined Credit Suisse Securities (India) Pvt. Ltd. as an Equity Research Analyst for 1.5 years, followed by his association with Barclays Securities India Pvt. Ltd as Equity Research for 4 years before joining Axis Mutual Fund.
At the fund house, along with Mr Jinesh, Mr Hitesh co-fund manages Axis Growth Opportunities Fund.
The outlook for Axis Retirement Savings Fund
As mentioned earlier the core objective of the Axis Retirement Savings Fund is to help investors align their investments as per their retirement needs by offering 3 different portfolio options as per the age band and risk bearing capacity of an investor.
The Aggressive and Dynamic Plans of Axis Retirement Savings Fund’s portfolio constructions is skewed heavily to equities. It could test the patience of several investors. In the current market conditions small caps and mid-caps sharply toppled down, and large caps showing signs of revival.
Although it provides an opportunity to do some value buying to the fund managers, the current valuations don’t justify the earnings. The trail P/E of the S&P BSE Sensex and the large-cap index is at 27.8x and 26.5x respectively. Even the P/E of the S&P BSE MidCap index has scaled to 28.1x. and that of the S&P BSE SmallCap Index is trading at a P/E multiple of around 41.1x.
Whereas for the Axis Retirement Savings Fund – Conservative Plan, the risk is less as compared to the other two plans and suitable for people who want regular income and have a time horizon of 3 years. As an investor, this is not completely risk-free. Factors such as inflation, the direction of policy rates, currency movement, fiscal deficit, and the consequent impact on yields, plus the ratings assigned to debt papers held in the portfolio, etc. will weigh on the potential performance of the scheme.
However, one cannot rule out the possibility of heightened volatility given the headwinds in play.
So, how the fund managers construct the portfolio to deal with the risk that could weigh down the performance remains to be seen. The fortune of the fund will be ultimately linked to the stocks, quality of corporate bonds, debt papers and money market instruments held in the overall portfolio.
Besides another noteworthy point, is that while investing in either of the three plans, through SIP, it provides an iPLUS SIP FACILITY. iPlus SIP will facilitate investors to plan for their goals by providing an optional SIP based insurance facility in the Scheme.
Basically, a group Life Insurance cover by a Life insurance company chosen by Axis AMC shall be provided under iPlus SIP to the investors (being an Eligible Investor mentioned in SID) without any extra cost. The premium for providing such cover shall be borne by Axis AMC.
Image 2: Provision of iPlus SIP.
