The ideal time to start your tax planning process is at the beginning of the financial year. 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. Under Section 80C of the Income Tax Act of 1961, tax-saving mutual funds or Equity Linked Savings Schemes (ELSS) can help you save up to Rs 1.5 lacs in taxes.

Many novice investors use ELSS or tax-saving mutual funds as a stepping stone to the equity market. The mandatory 3-year lock-in period for ELSS helps you weather stock market volatility, and the balanced portfolio construction reduces downside risk.

Investors looking for ways to reduce their tax obligations for the financial year 2022-2023 may consider investing in an Equity-linked savings scheme (ELSS). ELSS is a wise choice since it offers the lowest lock-in period and the highest potential for wealth creation when compared to other tax-saving instruments like PPF, NPS, fixed deposits, etc.

WhiteOak Capital Mutual Fund has launched it’s first tax-saving mutual fund scheme WhiteOak Capital Tax Saver Fund. It is an open-ended Equity Linked Savings Scheme with a statutory lock-in of 3 years and tax benefits.

The WhiteOak Capital Tax Saver Fund qualifies for tax deduction under Section 80C of the Income Tax Act, 1961. The fund will be invested in companies across market caps and sectors. Also, as the fund is classified under the equity funds category for taxation purposes, long-term gains from the fund are exempted up to Rs. 1,00,000. Beyond this limit, long-term gains will be taxed at a flat rate of 10% without the benefit of indexation.

Commenting on the launch of this fund, Mr Aashish Somaiyaa, CEO at WhiteOak Capital Mutual Fund, said, “After the launch of the Flexi Cap fund, which garnered significant interest across the country and globally, the Mid Cap and Tax Saver funds are again retail-centric equity offerings. Our priority is to put a basic product range in place and parallelly build our geographic presence and distribution relationships. The track record we build and the relationships we nurture in the next 2-3 years will ultimately result in scale; a scale that would have been achieved in a process-oriented and disciplined fashion.”

Table 1: Details of WhiteOak Capital Tax Saver Fund

Type An open-ended Equity Linked Savings Scheme with a statutory lock-in of 3 years and tax benefit. Category Equity Linked Savings Scheme (ELSS)
Investment Objective To generate capital appreciation/income from a portfolio comprising predominantly of equity & equity-related instruments. However, there can be no assurance or guarantee that the investment objective of the Scheme will be achieved.
Min. Investment Rs 500/- and in multiples of Re 1 thereafter. Additional Purchase Rs 500/- and in multiples of Re 1 thereafter. Face Value Rs 10/- per unit
SIP/STP/SWP Available
  • Direct
  • Regular
  • Growth
  • Income Distribution Cum Capital Withdrawal (IDCW)
Entry Load Not Applicable Exit Load Nil
Fund Manager
  • Mr Ramesh Mantri (for equity)
  • Mr Piyush Baranwal (for debt)
  • Ms Trupti Agrawal (for overseas investments)
Benchmark Index S&P BSE 500 TRI
Issue Opens: August 16, 2022 Issue Closes: September 23, 2022

(Source: Scheme Information Document

The investment strategy for WhiteOak Capital Tax Saver Fund will be as follows:

WhiteOak Capital Tax Saver Fund seeks to predominantly invest in equity & equity-related instruments. The aim of the equity strategy will be to build a portfolio of companies diversified across major industries, economic sectors and market capitalisation that offer an acceptable risk-reward balance.

The ELSS (Equity Linked Savings Scheme) guidelines, as applicable, would be adhered to in the management of this Scheme. The investment strategy is to invest in good businesses at attractive valuations based on stock selection and to avoid focusing on macro events. These are the two critical pillars of the investment philosophy – business and valuation. A good business is one that is well managed, scalable, and generates superior returns on incremental capital. Valuation is attractive when the current market price is at a substantial discount to intrinsic value. Key attributes to look for in a Business:

  • Superior returns on incremental capital

  • Scalable long-term opportunity

  • Strong execution and governance

The scheme will concentrate on creating a portfolio that is well-balanced and can perform through all market cycles without favouring any one market cap, investment style, or sector. The fund house uses an internal, proprietary investment framework called ‘Opco-Finco’, which is based on an analysis of cash flows; it avoids several distortions that can potentially emerge while using accounting multiples. Depending on the suitability, the traditional valuation approaches might be used for valuation.

The Fund managers will consciously seek to maintain a balanced portfolio rather than being driven by non-stock-specific macro factors, such as market timing, sector, currency or other such factor exposures.

Under normal circumstances, the asset allocation will be as under:

Table 2: Asset Allocation for WhiteOak Capital Tax Saver Fund

Instruments Indicative Allocation (% of net assets) Risk Profile
Minimum Maximum High/Medium/Low
Equity and Equity Related Instruments 80 100 Very High
Debt Securities and Money Market Instruments 0 20 Low to Medium

(Source: Scheme Information Document

The scheme may invest part of its portfolio in debt and money market instruments subject to permissible limits laid under SEBI (MF) Regulations. It will be guided by credit quality, liquidity, and interest rates outlook. The scheme may also have exposure to derivative instruments for the purpose of hedging, portfolio balancing and optimising returns.

Who will manage WhiteOak Capital Tax Saver Fund?

Mr Ramesh Mantri, Mr Piyush Baranwal and Ms Trupti Agrawal will be the designated fund managers for this scheme.

Mr Ramesh Mantri will be managing the equity portion of the scheme. He is a CFA, CA and MBA with over 18 years of experience in the financial market. Prior to joining WhiteOak Capital AMC, he was associated with Ashoka Capital Advisers, Smith Management – Mumbai office and CRISIL. At WhiteOak Capital Mutual Fund, Mr Mantri currently manages WhiteOak Capital Flexi Cap Fund.

Mr Piyush Baranwal will be managing the debt portion of the scheme. He is CFA and holds Bachelor of Engineering and PGDBM degrees. He has an overall experience of 13 years in Portfolio Management and trading in Fixed Income securities. Prior to joining WhiteOak Capital AMC, he was working with BOI AXA Investment Managers, Morgan Stanley Investment Management and Principal PNB Asset Management Company.

At WhiteOak Capital Mutual Fund, Mr Baranwal currently manages WhiteOak Capital Overnight FundWhiteOak Capital Liquid FundWhiteOak Capital Ultra Short Term Fund and WhiteOak Capital Flexi Cap Fund.

Ms Trupti Agrawal will be managing the overseas investments of the scheme. She is a CA and graduate with collectively around 13 years of experience in the financial services industry. Prior to joining WhiteOak Capital AMC, she was working with Khoob Saree, Marketune, L&T Infrastructure Finance Company Limited and S.R.Batliboi & Associates. At WhiteOak Capital Mutual Fund, Ms Agrawal currently does not manage any other schemes.

Fund Outlook – WhiteOak Capital Tax Saver Fund

WhiteOak Capital Tax Saver Fund aims to invest in equity and equity-related instruments and hence, has the potential to generate higher returns as compared to other tax-saving investment options like PPF, debt funds, etc.

This fund belongs to the ELSS category of mutual funds, which offers investors with a deduction under section 80C of the Income Tax Act, 1961, and it has a lock-in period of 3 years. The scheme will invest in equities across all market capitalisations and sectors. This will provide the investors with the inherent benefit of diversification, allowing them to reap the returns from diverse asset classes along with spreading the risk of investing in absolute equity.

The scheme aims to maintain a balanced portfolio construction of pro-cyclical and counter-cyclical stocks that help in reducing macroeconomic shocks. Similar to this, market cap and sector performance are constantly changing. Additionally, there could be a prolonged cycle of underperformance and overperformance. Therefore, a balanced portfolio that includes a mix of styles, such as value and growth, companies with large, mid, and small caps, and a mix of sectors that are both cyclical and defensive, among other things, can assist in improving performance consistency. The scheme being actively managed, the fund manager’s ability to construct the portfolio remains to be seen.

However, do note that the scheme invests a majority of its assets in equities, which are highly volatile in nature. The scheme is not free from inherent high market risks. Investors will not be allowed to liquidate their holdings for the duration of the lock-in period. In addition, the persistent repercussions of the Russia-Ukraine conflict, spiralling inflation and the rising policy rates to curb demand and control inflation may cause a significant risk to economic growth. The margin of safety appears to be narrow, and the clear direction for the equity market from the current elevated levels is unknown. These factors, among many others, could have a bearing on the scheme’s performance, and the scheme may face high volatility in the near term.

Thus, the scheme is suitable for investors looking for tax-saving options and has an investment horizon of a minimum of 5 years for the fund to grow and realise substantial appreciation of the investment. Ensure that you have a high-risk appetite and that your objectives align with the fund.

This article first appeared on PersonalFN here

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