Aditya Birla Sun Life Retirement Fund: Should You Invest For Your Retirement?
Feb 23, 2019

Author: Aditi Murkute

(Image source: freepik.com)

Aditya Birla Sun Life Retirement Fund is an open-ended retirement solution-oriented scheme having a lock-in of 5 years or till retirement age (whichever is earlier).

The Scheme offers 4 different Investment Plans according to the age bracket of an individual. Each Investment Plan will be managed as a separate portfolio.


 
  1. The 30s Plan: The plan aims to invest primarily in a well-diversified portfolio of equity and equity-related securities.

  2. The 40s Plan: The plan invests predominantly in equity and equity related instruments with marginal allocation to debt and money market instruments.

  3. The 50s Plan: The plan invests predominantly in debt and money market instruments with marginal allocation to equity and equity related instruments.

  4. The 50s Plus - Debt Plan: The plan invests in various debt securities and money market instruments issued by corporates and/or state and central government.

Table 1: NFO Details

Type An open-ended retirement solution-oriented scheme having a lock-in of 5 years or till retirement age (whichever is earlier) Category Special solution-oriented scheme (retirement fund)
Investment Objective It is income generation and capital appreciation for its investors which will be in line with their retirement goals by investing in a mix of equity, equity-related instruments along with debt and money market instruments.

The Scheme does not guarantee/indicate any returns. There can be no assurance that the Schemes' objectives will be achieved.
Min Investment Rs 5,000 and in multiples of Re 1 thereafter Face Value Rs 10 per unit
Investment Plans
  • 30s Plan
  • 40s Plan
  • 50s Plan
  • 50s Plus - Debt Plan
Plans
  • Direct
     
  • Regular
Options
  • Growth
     
  • * Dividend (Pay-out Facility & Reinvestment)
*Default option
Entry Load Not Applicable Exit Load Nil
Fund Manager Mr Ajay Garg and Mr Parnay Sinha Benchmark Index
  • 30s Plan: S&P BSE 200
     
  • 40s Plan: CRISIL Hybrid 35+65 -Aggressive Index
     
  • 50s Plan: CRISIL Short Term Debt Hybrid 75+25 Fund Index
     
  • 50s Plus - Debt Plan: CRISIL Short Term Bond Fund Index
Issue Opens: Tuesday, February 19, 2019 Issue Closes: Tuesday, March 5, 2019
(Source: Scheme Information Document)


How will Aditya Birla Sun Life Retirement fund allocate its assets?

Under normal circumstances, the asset allocation of the Investment Plans under the Scheme would be as follows:

1. 30s Plan

Table 2a: Asset allocation for 30s Plan

Instrument Risk Profile Range
Equity & Equity related instruments Medium to High 80% - 100%
Debt & Money Market Instruments Low to Medium 0-20%
(Source: Scheme Information Document)


- This plan may invest a maximum of 20% in securitized debt

2. 40s Plan

Table 2b: Asset allocation for 40s Plan

Instrument Risk Profile Range
Equity & Equity related instruments Medium to High 65% - 80%
Debt & Money Market Instruments Low to Medium 20% - 35%
(Source: Scheme Information Document)


- This plan may invest a maximum of 35% in securitized debt

3. 50s Plan

Table 2c: Asset allocation for 50s Plan

Instrument Risk Profile Range
Debt & Money Market Instruments Low to Medium 75% - 100%
Equity & Equity related instruments Medium to High 0% - 25%
(Source: Scheme Information Document)

- This plan may invest a maximum of 50% in securitized debt.

4. 50s Plus-Debt Plan

Table 2d: Asset allocation for 50s Plus-Debt Plan

Instrument Risk Profile Range
Debt & Money Market Instruments Low to Medium 100%
(Source: Scheme Information Document)


​- This plan may invest a maximum of 50% in securitized debt.

Further the scheme information document states that, each Investment Plan under the Scheme may also invest up to 50% of the portfolio (i.e. net assets including cash) in such derivative instruments as may be introduced from time to time subject to framework specified by SEBI, for the purpose of hedging and portfolio balancing and other uses as may be permitted under SEBI Regulations.

The cumulative gross exposure to equity, equity related instruments, debt, money market instruments and derivatives shall not exceed 100% of the net assets of the respective Investment Plans.

Under normal circumstances, each Investment Plan offered under this Scheme shall not have an exposure of more than 25% of its net assets in foreign securities.

What will be the Investment Strategy?

The scheme focuses to help an investor plan his retirement and for that construction of each portfolio has its own strategy as follows.

  1. The 30s Plan:

    The Plan aims to invest primarily in a well-diversified portfolio of equity and equity-related securities. The fund manager proposes to concentrate on business and economic fundamentals driven by in-depth research techniques and employing the full potential of the research team at the AMC.

    The stock selection process proposed to be adopted is generally a bottom-up approach seeking to identify companies with long term sustainable competitive advantage. The fund would also use a top-down discipline by ensuring representation of companies from all key sectors in the respective benchmarks.

    The fund manager would primarily focus on long term growth for identifying stocks on the equity side. The objective would be to identify businesses with superior growth prospects and strong management available at a reasonable valuation and offering higher risk-adjusted returns.

    The fund would follow a blend of bottom-up approach (for stock selection) and top-down approach (for sector allocation). The fund would follow flexi cap approach on market cap depending on risk-return profile of various sub-segments of the market.

    The decision to sell would be based on price reaching its fair value or availability of alternative investment opportunity offering higher risk-adjusted returns or anticipated price appreciation no longer possible due to change in business fundamentals.

  2. The 40s Plan:

    The plan invests predominantly in equity and equity related instruments with marginal allocation to debt and money market instruments. On the equity front, the fund manager proposes to concentrate on business and economic fundamentals driven by in-depth research techniques and employing the full potential of the research team at the AMC.

    The stock selection process proposed to be adopted is generally a bottom-up approach seeking to identify companies with long term sustainable competitive advantage. The fund would also use a top-down discipline by ensuring representation of companies from all key sectors in the respective benchmarks.

    The fund manager would primarily focus on long term growth for identifying stocks, hence would follow flexi cap approach on market cap depending on risk-return profile of various sub-segments of the market. The objective would be to identify businesses with superior growth prospects and strong management available at a reasonable valuation and offering higher risk-adjusted returns.

    On the debt front, the Fund invests in various debt securities and money market instruments issued by corporates and/or state and central government. With the aim of controlling risks, rigorous in-depth credit evaluation of the instruments proposed to be invested in is carried out by the Investment Team of the AMC.

  3. The 50s Plan

    The plan invests predominantly in debt and money market instruments with marginal allocation to equity and equity related instruments. On the debt front, the Fund invests in various debt securities and money market instruments issued by corporates and/or state and central government. With the aim of controlling risks, rigorous in-depth credit evaluation of the instruments proposed to be invested in is carried out by the Investment Team of the AMC.

    On the equity front, the fund manager proposes to concentrate on business and economic fundamentals driven by in-depth research techniques and employing the full potential of the research team at the AMC.

    The stock selection process proposed to be adopted is generally a bottom-up approach seeking to identify companies with long term sustainable competitive advantage. The fund would also use a top-down discipline by ensuring representation of companies from all key sectors in the respective benchmarks. The fund manager would primarily focus on long term growth for identifying stocks, hence would follow flexi cap approach on market cap depending on risk-return profile of various sub-segments of the market.

  4. The 50s Plus-Debt Plan

    The Plan invests in various debt securities and money market instruments issued by corporates and/or state and central government. The AMC aims to identify securities, which offer superior levels of yield at lower levels of risk. As per the asset allocation pattern, the Fund invests in various debt securities and money market instruments issued by corporates and/or state and central government. With the aim of controlling risks, rigorous in-depth credit evaluation of the securities proposed to be invested in will be carried out by the investment team of the AMC.

    The credit evaluation includes a study of the operating environment of the company, the past track record as well as the prospects of the issuer, the short as well as long-term financial health of the issuer. In addition, the Investment Team of the AMC studies the macroeconomic conditions, including the political, economic environment and factors affecting liquidity and interest rates.

Who will manage the Aditya Birla Sun Life Retirement Fund?

Mr Ajay Garg and Mr Pranay Sinha would be the designated Fund Manager of the Scheme.

Mr Ajay Garg holds a bachelors' degree in electronics engineering and is an MBA (Finance) with an overall work experience of 24 years in the financial services industry. He has an overall experience of 24 years in financial services. He is working with the ABSLAMC since January 2003. Prior to this, he worked with Birla Sun Life Securities Ltd.

Currently, at the fund house, some of the schemes which he manages include, Aditya Birla Sun Life Tax Plan, Aditya Birla Sun Life Dual Advantage Fund - Series I, Aditya Birla Sun Life Index Fund, Aditya Birla Sun Life MNC Fund and Aditya Birla Sun Life Tax Relief '96

Mr Pranay Sinha has a B. Tech degree in Aerospace Engineering from IIT Kharagpur and an MBA (in Finance) from IIM Kolkata. He has an overall experience of around 12 years in the financial markets. Prior to joining the fund house, he worked as a Trader - Interest Rates in BNP Paribas Bank for 4+ years. He also worked with Morgan Stanley Investment Management Private Limited and ICICI Prudential Asset Management Company Limited.

Currently at the fund house, the schemes he manages are Aditya Birla Sun Life Equity Hybrid '95 Fund, Aditya Birla Sun Life Government Securities Fund, Aditya Birla Sun Life Dynamic Bond Fund, Aditya Birla Sun Life Gold ETF, Aditya Birla Sun Life Income Fund, Aditya Birla Sun Life Regular Savings, Aditya Birla Sun Life Equity Savings Fund and Aditya Birla Sun Life Active Debt Multi Manager FoF Scheme.

The outlook for Aditya Birla Sunlife Retirement Fund

As mentioned earlier the core objective of the Aditya Birla Sun life Fund is to help investors align their investments as per their retirement needs by offering 4 different portfolio options. Each of the options has varying levels of risk-adjustable returns suitable for individuals in each age bracket. Hence the performance of the fund relies on the efficacy of the fund managers ability to construct each portfolio to handle the risk emanating from it.

  1. 30s Plan

    Since the portfolio is skewed majorly towards the equity segment, it has the highest risk and this year is bound to be volatile for equities. it could test the patience of several investors. We are in an election mode in the run-up to Lok Sabha elections in April-May 2019, and surrounded by factors viz. loss in economic momentum, pace of job creation is very slow, farm loan waiver and increased Minimum Support Prices (MSP) may weigh on fiscal deficit, domestic liquidity has been surreal, and people, in general, seem disgruntled after high hopes of Acche Din.

    It is suitable for investors having a retirement time horizon of three decades or more and an appetite for very high-risk appetite.

  2. 40s Plan

    This plan has equity along with little exposure to debt portion as well for stability to the portfolio. But, considering the asset allocation limits this plan is associated with high investment risk originating from equities. As mentioned above the fund managers will face a challenging time in the construction of the portfolio. This is because of the year of 2019 volatility.

    Hence this plan option is suitable only for investors who are willing to take high risk and have an investment time horizon of two decades or more years.

  3. 50s Plan

    This is suitable for people who seek regular income and have an investment time horizon of 5 years and willing to bare a moderate level of risk. As mentioned, the investments made will be under Government scrips, But the portfolio construction is a challenging task as debt markets too are facing troubled waters.

  4. 50s Plus-Debt Plan

    The risk is least as compared to the equity funds and suitable for people who want regular income and have a time horizon of 3 years. As an investor, this is not completely risk-free. Factors such as inflation, the direction of policy rates, currency movement, fiscal deficit, and the consequent impact on yields, plus the ratings assigned to debt papers held in the portfolio, etc. will weigh on the potential performance of the scheme.

    How the fund managers construct the portfolio to deal with the risk that could weigh down the performance remains to be seen. The fortune of the fund will be ultimately linked to the quality of corporate bonds, debt papers and money market instruments held in the overall portfolio.

[Read:  Skip NFOs, Instead Consider Building A Strategic Mutual Fund Portfolio]

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