x Where does an ELSS stand vis-à-vis other tax-saving instruments?
Compared to traditional tax-saving instruments like Public Provident Fund (PPF), National Savings Certificate (NSC) and bank fixed deposits; the lock-in period of an ELSS fund is much lower at three years. PPF investments are locked in for 15 years, NSC investments for six years, and bank FDs eligible for tax deduction are locked in for five years. In addition, ELSS is a kind of diversified equity mutual funds, which have a majority of the corpus invested in equities. Over the long-term period, equities have performed relatively better than alternatives available in India. ELSS schemes provide SIP investing options (along with lump sum), which can bring about discipline in regular investing. Also, one can get income from these schemes via dividends (based on availability of distributable surplus) in case one opts for a dividend plan. Therefore, investing in ELSS may give opportunity for better returns compared to other asset classes over the long term, subject to some conditions.
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x How is Axis Long Term Equity fund structured? What is the asset allocation of the fund?
The fund invests in equity and related instruments in the range of 80–100 per cent with the remaining allocation of the portfolio consisting of cash and cash equivalents (up to a maximum of 20 per cent).
x Tell us about the stock selection philosophy and the business model of this fund?
The fund’s investment philosophy is designed to find suitable investment opportunities while adopting effective risk management strategies. The key components are:
Long-term focus: Research stocks on the basis of their potential across market cycles (over 3-5 years).
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Active management: Exploit opportunities so that the portfolio reflects the best investment possible.
Quality assets: Rigorous search for quality companies with long-term sustainable growth and management track-record.
Fundamentals based: Utilises a ‘bottom up’ approach to identify fundamentally sound companies, while being agnostic of the benchmark constituents.
Research driven: Decisions are driven by extensive management and company research.
High conviction investing: A compact portfolio of stocks that reflects the fund manager’s best ideas.
Integrated risk management: Risk management embedded within the investment process.
x How do you narrow down stocks that enter the portfolio?
The team follows a strictly defined equity investment process, which starts with identifying the investment universe based on sustainable earnings growth potential, credible management and acceptable liquidity of the company. The fundamentals of these companies are analysed to arrive at their fair value, which is then used for bottom-up, stock-by-stock portfolio construction. In this process, we ensure that the fund is invested in-line with the investment objective of the strategy and in the interest of shareholders, at all times.
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x What has been the stock-picking lesson that you have picked in managing this fund?
Although we believe that India is a growth market, within the broad market only ‘quality’ companies are able to sustain profitable growth and generate long-term returns for shareholders. We believe a fundamental investment approach focused on identifying such sustainable businesses that can deliver sustainable cash flows while controlling risk is the best way to deliver returns over the long term.
x For what kind of investors is this product suitable?
The fund endeavours to generate income and long-term capital appreciation from a diversified portfolio of predominantly Indian equities. The 3-year lock-in eliminates near term volatility pressure and facilitates us to build a portfolio that can support quality businesses through their market cycle. The fund is worth looking at not just for tax saving but also for overall longterm investment requirements
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