Axis Long Term Equity Fund: Emphasizing on Quality Businesses
Jun 18, 2020
The last day for investing in tax-saving instruments to be eligible for deductions under Section 80C of the income tax in a financial year is March 31. This year due to the disruptions caused by the pandemic-induced lockdown and as many taxpayers were facing cash flow related issues, the deadline has been extended to June 30 for FY 2019-20.
If you are yet to complete your tax-saving exercise for FY 2019-20, the deadline extension will provide some relief. However, if you have exhausted the limit of Rs 150,000 for FY 2019-20, the investment you make will be eligible for deduction in FY 2020-21.
Among the various tax-saving options available, Equity-Linked Saving Scheme (ELSS), an equity-oriented mutual fund, can not only maximise your wealth but can act as an efficient tax planning instrument.
Axis Long Term Equity Fund (ALTEF) is one of the well-managed schemes in the ELSS category that stands out for its ability to generate superior returns across market cycles.
Graph 1: Growth of Rs 10,000 if invested in Axis Long Term Equity Fund 5 years ago
ALTEF is the the most popular fund in the ELSS category. Belonging to a process-driven fund house, ALTEF focuses on investing in quality businesses having long term earnings growth prospects. ALTEF has showcased impressive performance since its launch and has rewarded its investors by generating significant alpha over its benchmark. In the last 5 years, ALTEF has generated a compounded return of 8.4%, as against 5.7% CAGR clocked by the benchmark S&P BSE 200 - TRI. An investment of Rs 10,000 in the fund five years back, now would have grown to Rs 14,956 whereas; a simultaneous investment in its benchmark would now be worth Rs 13,178.
Data as on June 17, 2020
(Source: ACE MF)
Table: Axis Long Term Equity Fund's performance vis-a-vis category peers
Returns are point to point and in %, calculated using Direct Plan - Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on June 17, 2020
(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.
ALTEF has shown healthy performance over the years and currently ranks among the top performers in the ELSS funds category. The fund has clearly beaten its benchmark across time periods, but also outpaced the category average with considerable margin of 4 to 6 percentage points.
Some of the other top performers in the category are Mirae Asset Tax Saver, Canara Rob Equity Tax Saver Fund and Invesco India Tax Plan.
ALTEF has clearly stood out in terms of risk-adjusted returns. The funds Standard Deviation of 19.02 reflecting its volatility has been slightly lower than the category average and the benchmark. Its Sharpe of 0.01 is among the best in the category and clearly surpasses that of the benchmark.
Investment strategy of Axis Long Term Equity Fund
Classified under ELSS Funds category, ALTEF is mandated to invest at least 80% of its assets in equity and equity related instruments. The scheme endeavours to remain fully invested in equity and equity related instruments at all times. The fund maintains a large cap bias where it looks to invest 50-100% of its assets. It also holds significant allocation in mid-caps, limiting it up to 50% of its assets.
ALTEF invests in a diversified portfolio of strong growth companies with robust business models and sustainable competitive advantage. ALTEF focuses on long term earnings growth prospects and quality as key criteria for stock selection. While picking stocks, the fund's management aims for companies that are leaders, have solid growth prospects, impeccable execution, strong finances, and decent operating cash flows.
Graph 2: Top portfolio holdings in Axis Long Term Equity Fund
Holding in (%) as on May 31, 2020
(Source: ACE MF)
ALTEF usually holds a compact portfolio of around 30 to 35 stocks, something that is uncommon for funds with large corpus. As on May 31, 2020, ALTEF held about 35 high conviction stocks in its portfolio. The top 10 holdings in the portfolio accounted for a major 64% of its assets. TCS is the top holding in the portfolio having an allocation of 8.5%, followed by Avenue Supermarts, Kotak Mahindra Bank, HDFC Bank,and Nestle India. Most stocks in the portfolio have been held for a period of 2 years or more.
The fund has benefitted immensely from its holdings in Avenue Supermarts, Info Edge (India), Nestle India, Torrent Power, Pidlite Industries, Divi's Laboratories, etc. in the last one year, while it lost some value in stocks like Bajaj Finance, Kotak Mahindra Bank, HDFC Bank, HDFC, TTK Prestige, among others.
ALTEF invests in a mix of cyclical and defensive sectors. It has placed heavy bets on Banking and Finance that together account for around 28% of its total assets. Infotech has the next highest allocation, followed by Retail, Consumption, Auto, Pharma, Chemicals and Power.
Suitability
ALTEFF has a very impressive track record of generating superior long term returns as compared to its benchmark and many of its category peers. Its emphasis on picking quality stocks having high growth potential has resulted in healthy returns across market cycles in the past. Although ALTEF holds a compact portfolio, it is not too concentrated to any selective stocks. However, on a broader allocation, the exposure to few sectors is considerably high, which make them prone to high volatility. As ELSS come with a lock-in period, investors do not have an exit option in case the scheme underperforms during that period. Such funds are suitable only for aggressive investors having an investment horizon of 5 years or more.
Warm Regards,
Divya Grover
Research Analyst
Editor's note: The last few years have not been among the best for equity mutual funds. While most funds have underperformed or are struggling to match the returns of the benchmark, there are few funds that have the potential to constantly generate alpha for its investors. And we have identified five such high alpha generating funds, in our latest report 'The Alpha Funds Report 2020'. Do not miss our latest research finding. Get your access to this exclusive report, right here!
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.
Join Now: PersonalFN is now on Telegram. Join FREE Today to get ‘Daily Wealth Letter’ and Exclusive Updates on Mutual Funds
DISCLOSURE AS PER SECURITIES AND EXCHANGE BOARD OF INDIA (RESEARCH ANALYSTS) REGULATIONS, 2014
About the Company including business activity
Quantum Information Services Private Limited (QIS) was incorporated on December 19, 1989.
QIS was promoted by Mr Ajit Dayal with an objective of providing value-based information/views on news related to equity markets, the economy in general, sector analysis, budget review and various personal products and investments options available to the Public. It was the first company to start equity research on an institutional level.
'PersonalFN' is a service brand of QIS and was started in the year 1999. In 1999, the Company registered the Domain name www.personalfn.com for providing information on mutual funds and personal financial planning, financial markets in general, etc. and services related to financial planning and research in various financial instruments including mutual funds, insurance and fixed income products to customers. It offers asset allocation and researched investment recommendations through its financial planning services.
Quantum Information Services Private Limited (QIS) is registered as Investment Adviser under SEBI (Investment Adviser) Regulations, 2013 and having Registration No.: INA000000680. In terms of the second proviso to Regulation 3 (1) of SEBI (Research Analysts) Regulations, 2014 the Company is not required to obtain Certificate of registration from SEBI.
Disciplinary history
There are no outstanding litigations against the Company, its subsidiaries and its Directors.
Terms and condition on which its offer research report
For the terms and condition for research report click here.
Details of associates
-
Money Simplified Services Private Limited;
-
PersonalFN Insurance Services India Private Limited;
-
Equitymaster Agora Research Private Limited;
-
Common Sense Living Private Limited;
-
Quantum Advisors Private Limited;
-
Quantum Asset Management Company Private Limited;
-
HelpYourNGO.com India Private Limited;
-
HelpYourNGO Foundation;
-
Natural Streets for Performing Arts Foundation;
-
Primary Real Estate Advisors Private Limited;
-
HYNGO India Private Limited;
-
Rahul Goel;
-
I V Subramaniam.
Disclosure with regard to ownership and material conflicts of interest
-
‘subject company’ is a scheme on which a buy/sell/hold view or target price is given/changed in this Research Report;
-
Neither QIS, it's Associates, Research Analyst or his/her relative have any financial interest in the subject Company; except for one of the Research Analysts holding units of Axis Long Term equity Fund;
-
Neither QIS, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one per cent or more securities of the subject Company, at the end of the month immediately preceding the date of publication of the research report;
-
Neither QIS, it's Associates, Research Analyst or his/her relative has any other material conflict of interest at the time of publication of the research report except that QIS (PersonalFN) is, as per SEBI (Mutual Funds) Regulations 1996, an associate / group Company of Quantum Asset Management Company Private Limited and Trustees and Sponsor of Quantum Mutual Fund (QMF) and to that extent there may be conflict of interest while recommending any schemes of QMF. However, any such recommendation or reference made is based on the standard evaluation and selection process, which applies uniformly for all Mutual Fund Schemes. The payment of commission (upfront / annualized & trail), if any, for any Schemes by QMF to QIS (PersonalFN) is also at arm's length and as per prevailing market practices.
Disclosure with regard to receipt of Compensation
-
Neither QIS nor it's Associates have received any compensation from the subject Company in the past twelve months;
-
Neither QIS nor it's Associates have managed or co-managed public offering of securities for the subject Company;
-
Neither QIS nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject Company;
-
Neither QIS nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
-
Neither QIS nor it's Associates have received any compensation or other benefits from the subject Company or third party in connection with the research report
General disclosure
-
The Research Analyst has not served as an officer, director or employee of the subject Company.
-
QIS or the Research Analyst has not been engaged in market making activity for the subject Company.
Click here to read PersonalFN's Mutual Fund Rating Methodology
Subject Company means Mutual Fund Schemes
Quantum Information Services Private Limited CIN: U65990MH1989PTC054667 Regd. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021 Corp. Office: 16 Jolly Maker Chambers II, Nariman Point, Mumbai 400 021.
Email:info@personalfn.com Website: www.personalfn.com Tel.: 022 61361200 Fax.: 022 61361222 SEBI-registered Investment Adviser. Registration No. INA000000680, SEBI (Investment Advisers) Regulation, 2013