Investing in ELSS offers you the triple advantage of tax-saving (under Section 80C of the Income Tax), wealth creation through equities, and the lowest lock-in period compared to other tax-saving instruments. The core objective of investing in ELSS is to maximise wealth by investing in a diversified basket of stocks spread across sectors and market caps.
When you invest in ELSS, ensure that you select the best scheme that has the potential to create superior long-term wealth by analysing it on various quantitative and qualitative parameters.
Mirae Asset Tax Saver Fund is a process-driven tax-saving fund that has built a superior track record and gained popularity among investors in a shorter time span.
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 October 11, 2022
(Source: ACE MF)
Launched in December 2015, Mirae Asset Tax Saver Fund has been in existence for nearly seven years. The fund has established a superior track record for itself in a short time span and has caught the attention of investors. Backed by a process-driven fund house known for its cautious investment approach and superior risk management abilities, Mirae Asset Tax Saver Fund has delivered splendidly 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 offering growth at a 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 around 15.6% in the last five years, Mirae Asset Tax Saver Fund has significantly outperformed the benchmark Nifty 500 – TRI by a CAGR of over 3 percentage points. An investment of Rs 10,000 in the fund five years ago would have now appreciated to Rs 20,621 as against a valuation of Rs 17,740 for the simultaneous investment in the benchmark.
Table: Mirae Asset Tax Saver Fund’s performance vis-á-vis category peers
|Quant Tax Plan
|Parag Parikh Tax Saver Fund
|IDFC Tax Advt (ELSS) Fund
|Bank of India Tax Advantage Fund
|Canara Rob Equity Tax Saver Fund
|Mirae Asset Tax Saver Fund
|Kotak Tax Saver Fund
|Union Long Term Equity Fund
|PGIM India ELSS Tax Saver Fund
|UTI LT Equity Fund (Tax Saving)
|NIFTY 500 – TRI
Returns are point to point and in %, calculated using the Direct Plan-Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on October 11, 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 does not have a very long-term track record to its credit. However, the robust performance numbers it has registered in a short span of time is sufficient to prove its high return potential. The fund has stood strong against its popular peers and has managed to outperform the 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 respectively generated returns at 21.8% and 15.6% CAGR, which is among the highest in the category and clearly stands far ahead of the benchmark.
More importantly, Mirae Asset Tax Saver Fund has achieved this feat at a reasonable risk, thus rewarding its investors with superior risk-adjusted returns. The Sharpe Ratio (0.23) reflecting the fund’s ability to deliver better risk-adjusted returns has been commendable too.
Investment strategy of Mirae Asset Tax Saver Fund
With an investment objective of generating long-term capital appreciation from a diversified portfolio of predominantly equity and equity-related instruments, Mirae Asset Tax Saver Fund is mandated to hold at least 80% of its assets in equities. 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 growth ratios.
Following a mix of a top-down and bottom-up approach to 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 the 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.
The fund aims to identify long-term investment opportunities in stocks of high-quality businesses available at reasonable prices and follows a buy and hold investment strategy until its full potential is derived. Mirae Asset Tax Saver Fund has had a moderate portfolio turnover of around 70-80% in the last one year.
Graph 2: Top portfolio holdings in Mirae Asset Tax Saver Fund
Holding in (%) as of September 30, 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 September 30, 2022, Mirae Asset Tax Saver Fund held as many as 70 stocks in the portfolio. The top 10 stock holdings in the portfolio accounted for nearly 44.5% of the total assets. Large-cap names like HDFC Bank, ICICI Bank, Reliance Industries, Infosys, and Axis Bank, among others, appear in the list of its top holdings. Notably, 4 out of the top 10 stocks belong to the Banking sector. 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 benefitted the most from its holdings in ICICI Bank, SBI, ITC, SKF India, and Bharti Airtel. However, the fund’s holdings in Infosys, HDFC Bank, TCS, Mphasis, Tata Steel, Gujarat State Petronet, etc., eroded some of its gains.
Banking and Finance stocks together form about 34.3% of its portfolio. The fund also holds substantial exposure in Infotech, Consumption, Engineering, Petroleum, Pharma, Telecom, and Auto, having allocation in the range of 3% to 10% of its assets. The top 10 sectors together occupied 80.9% of the fund’s portfolio. Although Mirae Asset Tax Saver Fund’s portfolio is skewed towards cyclicals, it is fairly diversified to defensives as well.
Belonging to a process-driven fund house that follows a cautious investment approach, Mirae Asset Tax Saver Fund has benefited by investing in high growth-oriented stocks but at the right valuations. The superior stock-picking strategy has helped it identify the right stocks and outpace the market across time periods. It has been agile enough to take advantage of various investment opportunities present across segments.
Mirae Asset Tax Saver Fund is managed by an experienced fund manager, Mr Neelesh Surana, whose stock convictions have proved to be rewarding for investors in the scheme.
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 under control and perform well even in uncertain market conditions.
Mirae Asset Tax Saver Fund is suitable for investors looking to invest in a well-managed ELSS with a view to benefit from wealth creation and tax-saving over an investment horizon of 3-5 years.
This article first appeared on PersonalFN here