Mirae Asset Tax Saver Fund: Seizing Superior Growth Opportunities

ELSS are open-ended equity mutual funds that have a statutory lock-in period of 3 years, which is lesser than other tax-saving instruments. Selecting a worthy ELSS can help you accumulate wealth over the long term and also serve your tax planning purpose.

Mirae Asset Tax Saver Fund (MATSF) is one such ELSS that has distinctly outperformed the benchmark and many of its peers.

Data as on April 07, 2021
(Source: ACE MF)

With its inception a little over five years ago, MATSF does not have an extensive performance track record to its credit. However, the robust performance numbers it has generated in this short span of time is sufficient to prove its high potential to generate adequate returns. The fund has stood strong against its popular peers and has managed to outperform its category average and the benchmark by a noticeable margin across time periods.

More importantly, the fund has achieved this feat at a reasonable risk, thus rewarding its investors with superior risk-adjusted returns. The fund's volatility is nearly in line with that of the category average and the benchmark Nifty 200 - TRI; while its risk-adjusted return denoted by Sharpe Ratio is among the highest in the category.

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, MATSF 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 reasonable price.

The universe of stocks for the portfolio comprises majorly of companies that have robust business models, enjoy sustainable competitive advantage and have high return ratios. Following a blend of the top-down and bottom-up approach of investing, the fund manager broadly analyses the macro economy and invests in stocks of high-growth companies expected to benefit from macroeconomic, sectoral, and industry trends.

When picking companies, the fund manager tests 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 reasonable rate). The fund manager uses DCF (Discounted Cash Flow) mechanism to estimate the fair valuation level of stocks. The aim is to identify long-term investment opportunities in stocks of high quality businesses available at reasonable prices and follow the buy-and-hold investment strategy until its full potential is derived.

The fund usually holds predominant exposure to large caps (65-75% of its assets) along with substantial allocation in mid and small caps (25-30% of its assets).

MATSF usually holds a well-diversified portfolio of stocks spread across market caps, but with a large-cap bias. As on February 28, 2021, MATSF held as many as 60 stocks in the portfolio. The top 10 stock holdings in the portfolio accounted for nearly 48.7% of the total assets. Large cap names like HDFC Bank, Infosys, ICICI Bank, Reliance Industries, and Axis Bank, among others appear in the list of its top holdings. Many of these stocks have been part of the fund's top holdings for over 2 years now.

In the last one year, MATSF has benefited from its holding in companies large-cap and mid-cap names like Reliance Industries, HDFC Bank, Infosys, Prince Pipes & Fittings, Havells India, TCS, Voltas, Bharat Electronics, SBI, JK Cement, Max Financial Services, Tata Consumer Products, ICICI Bank etc. that have turned out to be major contributors to its returns.

MATSF's portfolio is majorly exposed to stocks in the Banking and Finance sector that currently form around 37.5% its assets. The fund also held substantial exposure in Infotech, Consumption, Petroleum Products, Pharma and Engineering with an allocation in the range of 5% to 12% of its assets. The top 10 sectors together occupied 86.6% of MATSF's portfolio.

Suitability

MATSF has built a commendable performance track record for itself in a short span of around 5 years and has dominated the ELSS space for quite some time. Its bet on fundamentally sound stocks picked at reasonable valuations has benefited the fund so far.

MATSF belongs to a process-driven fund house that follows prudent investment approach. It does not resort to taking aggressive calls for extraordinary returns, but maintains a diversified portfolio of quality stocks with a long term view. Its fund manager Mr Neelesh Surana, who has been managing the scheme since its inception, has done well to keep volatility at a reasonable level and thereby able to generate superior risk-adjusted returns.

This makes MATSF suitable for investors looking for a growth-oriented fund in the ELSS space with a long term view.

Warm Regards,
Divya Grover
Research Analyst

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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.

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1. Money Simplified Services Private Limited;

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