An Equity Linked Savings Scheme (ELSS), also known as tax saving mutual fund, offers investors an opportunity to grow their wealth along with tax saving benefits under Section 80C. These funds invest in equities across market caps and come with a lock-in period of three years.
When compared to other popular tax-saving instruments such as tax-saving FD and PPF, ELSS has the potential to reap higher returns for its investors, which makes it a worthy avenue for tax efficiency and long-term wealth creation.
Canara Robeco Equity Tax Saver Fund is a tax saving mutual fund that has maintained a consistent lead over its benchmark and the category average across various market phases at a relatively lower risk.
Graph 1: Growth of Rs 10,000 if invested in Canara Robeco Equity Tax Saver Fund 5 years ago
Past performance is not an indicator of future returns
Data as on January 10, 2022
(Source: ACE MF)
Canara Robeco Equity Tax Saver Fund is one of the oldest schemes in the tax-saving fund category with a track record of nearly 30 years to its credit. Since its inception in March 1993, the fund has generated superior returns at about 14.4% CAGR. However, the journey of its performance was not very smooth. The fate of the fund as well as the fund house was influenced by the instability of the fund management team that saw a high churn during the 2011-2012 and 2014-2017 period, and the impact was witnessed across Canara Robeco schemes. However, the current team seems to be relatively stable as it has expanded over the years with proper back-ups at the core position. Moreover, the fund house has excelled in terms of performance across almost all its schemes, over the last few years. In the last 5 years, Canara Robeco Equity Tax Saver Fund has appreciated at a CAGR of around 15.2%, much better than the 11.3% CAGR generated by its benchmark S&P BSE 500 – TRI index. An investment of Rs 10,000 in the fund 5 years back would have now more than doubled to Rs 20,271 as against Rs 17,065 for the simultaneous investment in its benchmark.
Table: Canara Robeco Equity 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
|PGIM India ELSS Tax Saver Fund
|Mirae Asset Tax Saver Fund
|Mahindra Manulife ELSS Kar Bachat Yojana
|Union Long Term Equity Fund
|SBI Long Term Equity Fund
|S&P BSE 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 January 10, 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 of future returns. The percentage returns shown are only for indicative purposes.
Canara Robeco Equity Tax Saver Fund has registered exceptional performance over the long-term time frames. The fund has stood out in the tax-saving fund category by limiting the downside during tough market conditions and participating well in the recovery and bull run. With a CAGR of 20.5% in the last 3 years, the fund has outscored the benchmark and category average by a remarkable margin and has turned out to be one of the top performers in the ELSS category. Over the longer time horizon of 5 years and 7 years, Canara Robeco Equity Tax Saver Fund has beaten many of the popular category peers by a noticeable margin and delivered returns higher than the benchmark.
Moreover, the fund has generated superior risk-adjusted returns for its investors. With a standard deviation of 21.4%, Canara Robeco Equity Tax Saver Fund has shown relatively lower volatility in performance. Its Sharpe Ratio (0.23) indicating the risk-adjusted returns is among the best in the ELSS category and far better than the benchmark S&P BSE 500 – TRI.
Investment strategy of Canara Robeco Equity Tax Saver Fund
Canara Robeco Equity Tax Saver Fund is an actively managed fund that focuses on a growth-oriented investment style with an aim for long-term capital appreciation. It focuses on a multi-cap portfolio strategy and holds a well-diversified portfolio spread across market caps. The fund follows a mix of a top-down and bottom-up approach to stock picking with a preference for high-growth-oriented stocks in attractive-looking sectors. Canara Robeco Equity Tax Saver Fund seeks to benefit from long-term investment due to its lock-in and has a blended portfolio of diversified stocks with GARP (Growth at Reasonable Price) style of investing.
Canara Robeco Equity Tax Saver Fund seeks to identify companies with a strong competitive position in good business and those having quality management. The fund management gives high importance to the qualitative features, management, and governance. It also looks at Quantitative parameters by analysing the balance sheet. The core focus remains on earnings, growth, and cash flow generating businesses. The fund managers use valuation to determine the weight i.e. underweight/overweight position of stocks and sectors in the portfolio. Canara Robeco Equity Tax Saver Fund holds a pre-dominant large-cap portfolio, where at least 60% of its asset is invested into large caps and a maximum of 40% into mid and small caps.
Graph 2: Top portfolio holdings in Canara Robeco Equity Tax Saver Fund
Holding in (%) as of December 31, 2022
(Source: ACE MF)
Canara Robeco Equity Tax Saver Fund follows an active investment approach focusing on long-term fundamentally driven values. It usually holds a well-diversified portfolio spread across market caps. As of December 31, 2022, the fund held 61 stocks in its portfolio with top holdings in popular large-cap names like ICICI Bank, HDFC Bank, Infosys, SBI, and Reliance Industries. The top 10 holdings in the portfolio together accounted for around 44.3% of its assets.
The encouraging performance of the fund in the last two years has been driven by stocks of ICICI Bank, SBI, L&T, Infosys, Hindalco Industries, Axis Bank, TCI Express, Bajaj Finance, HDFC Bank, and Reliance Industries. Meanwhile, the fund managers have booked substantial profits in HCL Technologies, Crompton Greaves Consumer Electricals, Indiamart Intermesh, Persistent Systems, Cipla, LTI Mindtree, Dixon Technologies, among others.
In terms of sector holdings, Canara Robeco Equity Tax Saver Fund maintains a mix of Defensives and Cyclicals in the portfolio. Banking and Finance stocks together form around 34% of its portfolio while Infotech, Auto & Auto Ancillaries, Engineering, and Consumption follow with an allocation range of 7-10%. Pharma, Petroleum, Cement, Chemicals, Transportation, and Telecom were among the other core sectors in the portfolio. About 58% of its portfolio was concentrated across the top 5 sectors.
Canara Robeco Equity Tax Saver Fund maintains a well-diversified portfolio of quality stocks with a long-term view. Despite being an aggressive growth-oriented fund, the fund managers avoid taking momentum bets and focus on quality stocks with solid growth potential in the long run. The nimble approach followed by the fund helps it take advantage of sector rotations during positive as well as negative market conditions, and even improves its chances of riding out tough market conditions.
The sound risk management techniques followed at the fund house have helped Canara Robeco Equity Tax Saver Fund do well to curb the downside risk during bear market phases. Moreover, the fund has actively participated in the ensuing bull phases, wherein its performance has been superior to the category average as well as the benchmark index.
Canara Robeco Equity Tax Saver Fund is suitable for investors looking for a well-managed ELSS that have to potential to create superior long-term wealth and also offer tax-saving benefits.
This article first appeared on PersonalFN here