The beginning of the financial year is the best time to begin your tax planning exercise. Doing so allows you to explore various tax-saving avenues and pick the most suitable one that aligns with your investment objective, risk profile, and investment horizon.
Among the various avenues available for tax saving, Equity-Linked Saving Scheme (ELSS) is a worthy avenue if you wish to achieve the dual benefit of long-term capital growth and tax-saving benefit. Selecting a worthy ELSS can help you accumulate wealth over the long term and also serve your tax planning purpose.
Mirae Asset Tax Saver Fund is one such ELSS that has built an exceptional track record and figures among top quartile performers across various time periods.
Graph 1: Growth of Rs 10,000 if invested in Mirae Asset Tax Saver Fund 5 years ago
Past performance is not an indicator of future returns
Data as on April 27, 2022
(Source: ACE MF)
Launched in December 2015, Mirae Asset Tax Saver Fund has been in existence for a little over six years. Backed by process-driven fund management that is known for its cautious investment approach and superior risk management abilities, Mirae Asset Tax Saver Fund has delivered on the returns front. The fund has the flexibility to invest across market capitalisation, themes, and investment styles. Accordingly, it holds a diversified portfolio of strong growth companies at reasonable price spread across sectors. Mirae Asset Tax Saver Fund has delivered strong returns since its inception, generating superior risk-adjusted returns for its investors. With a CAGR of 18.3% in the last five years, Mirae Asset Tax Saver Fund has significantly outperformed the benchmark Nifty 500 – TRI by a CAGR of around 4.5 percentage points. An investment of Rs 10,000 in the fund five years ago would have now appreciated to Rs 23,192, as against a valuation of Rs 19,005 for the simultaneous investment in the benchmark.
Table: Mirae Asset Tax Saver Fund’s performance vis-á-vis category peers
|Scheme Name||Corpus (Cr.)||1 Year||2 Year||3 Year||5 Year||7 Year||Std Dev||Sharpe|
|Quant Tax Plan||1,166||40.46||75.04||37.61||24.70||23.16||25.84||0.35|
|BOI AXA Tax Advantage Fund||593||18.50||40.07||25.15||17.99||16.11||20.29||0.29|
|Mirae Asset Tax Saver Fund||11,790||19.89||43.66||21.31||18.31||—||22.69||0.23|
|IDFC Tax Advt(ELSS) Fund||3,716||28.37||54.45||21.24||16.63||15.59||25.58||0.22|
|Canara Rob Equity Tax Saver Fund||3,586||18.52||37.95||20.33||16.79||14.88||20.88||0.24|
|PGIM India ELSS Tax Saver Fund||384||26.25||43.70||19.46||15.09||—||21.90||0.22|
|Union Long Term Equity Fund||492||22.93||39.56||18.91||13.51||11.26||21.17||0.22|
|DSP Tax Saver Fund||9,872||20.91||41.11||18.86||14.63||15.68||22.24||0.21|
|Kotak Tax Saver Fund||2,696||19.81||39.23||18.20||14.00||14.71||21.56||0.21|
|Mahindra Manulife ELSS Kar Bachat Yojana||463||23.35||41.12||18.16||12.44||—||21.44||0.21|
|NIFTY 500 – TRI||20.67||40.71||16.31||13.70||13.18||22.46||0.18|
Returns are point to point and in %, calculated using Direct Plan-Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on April 27, 2022
(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.
Mirae Asset Tax Saver Fund has been relatively successful during both upside as well as downside markets. The fund has stood strong against its peers and has managed to outperform its category average as well as the benchmark by a noticeable margin across most time periods. Over the long-term horizon of 3 years and 5 years, Mirae Asset Tax Saver Fund has generated respective returns at 21.3% and 18.3% CAGR, which is among the highest in the category and clearly stands far ahead of the benchmark. Even the short-term performance of the fund is reasonable.
More importantly, the fund has achieved this feat at a reasonable risk, thus rewarding its investors with superior risk-adjusted returns as well. The volatility registered by the fund is nearly in line with the benchmark, whereas its Sharpe Ratio (0.23), reflecting the fund’s ability to deliver better risk-adjusted returns, has been commendable.
Investment strategy of Mirae Asset Tax Saver Fund
Mirae Asset Tax Saver Fund is mandated to hold at least 80% of its assets in equity and equity-related instruments. The fund has no bias towards any particular theme or investment style and holds a well-diversified portfolio of strong growth companies available at a reasonable price. The universe of stocks for the portfolio comprises majorly of companies having robust business models, enjoying sustainable competitive advantage, and having high return ratios.
Following a top-down and bottom-up approach of investing, the fund manager broadly analyses the macroeconomy and invests in stocks of high-growth companies expected to benefit from macroeconomic, sectoral, and industry trends. While picking companies, the fund manager tests business on various quantitative and qualitative parameters and gives importance to ROCE, growth, ROI, value, and management. He looks for growth businesses and, within that, looks for value (buy at a reasonable rate). The fund manager uses the DCF (Discounted Cash Flow) mechanism to estimate the fair valuation level of stocks.
Mirae Asset Tax Saver Fund aims to identify long-term investment opportunities in stocks of high-quality businesses available at reasonable prices and follow a buy-and-hold investment strategy until its full potential is derived. The fund had a moderate portfolio turnover of around 70-90% in the last one year.
The fund usually holds predominant exposure to large caps (65-75% of its assets) along with substantial allocation in mid and small-caps (20-30% of its assets).
Graph 2: Top portfolio holdings in Mirae Asset Tax Saver Fund
Holding in (%) as of March 31, 2022
(Source: ACE MF)
Mirae Asset Tax Saver Fund usually holds a well-diversified portfolio of stocks spread across market caps but with a large-cap bias. As of March 31, 2022, the fund held as many as 67 stocks in the portfolio. The top 10 stock holdings in the portfolio accounted for nearly 45.2% of the total assets. Large-cap names such as Infosys, HDFC Bank, ICICI Bank, Reliance Industries, and Axis Bank, among others, appear in the list of its top holdings. Most of these stocks have been part of the fund’s top holdings for over 2 years now.
In the last one year, Mirae Asset Tax Saver Fund has benefited from its holdings in Infosys, ICICI Bank, Bharti Airtel, Tata Steel, and SBI, that have turned out to be major contributors to its returns. It also benefitted from its holdings in Indian Energy Exchange, TCS, UTI Asset Management Co., Prince Pipes and Fittings, Sun Pharma, Reliance Industries, etc.
In terms of sector, Banking and Finance stocks together form a major 34% of its portfolio. The fund also held substantial exposure in Infotech, Petroleum, Consumption, Pharma, Engineering, Auto, and Consumer Durable with an allocation in the range of 3% to 14% of its assets. The top 5 sectors together occupied about 62% of Mirae Asset Tax Saver Fund’s portfolio. Although its portfolio is skewed towards cyclicals, it is fairly diversified to defensives as well.
The superior stock-picking strategy has helped Mirae Asset Tax Saver Fund to identify the right stocks and outscore the market across time periods. It has been agile enough to take advantage of various investment opportunities present across segments and has a very positive outlook.
The fund does not resort to taking aggressive calls for extraordinary returns but maintains a diversified portfolio of quality stocks with a long-term view. This strategy of the fund house has enabled it to keep the risk low and perform well even in uncertain market conditions. With an experienced fund manager at the helm, Mr Neelesh Surana, whose stock convictions have played out well in the past, the fund has the ability to do well in the future as well.
Mirae Asset Tax Saver Fund is suitable for investors looking for a growth-oriented fund in the ELSS space with a long-term view.
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