Should You Deploy Your Savings In Mirae Asset Equity Savings Fund?   Dec 05, 2018


Mirae Asset Mutual Fund has made yet another addition to its product basket this year with the launch of Mirae Asset Equity Savings Fund (MAESF), an open-ended scheme investing in equity, arbitrage and debt.

Equity Savings Fund as categorised by the market regulator, SEBI, is a Hybrid Fund. Meaning, it invests in equity and equity related instruments (including derivatives), debt & money market instruments, and would explore arbitrage opportunities. If there are no arbitrage opportunities available, the scheme has the flexibility to invest in debt.

As per the mandate, MAESF will invest upto 90% of its assets in equity and equity related instruments (including hedged and unhedged positions) in normal circumstances and the remaining in debt & money market instruments.

However, if the fund manager is of the view that the economic or market conditions may become unfavourable for investors in equities, MAESF could reduce the allocation to equities, particularly the unhedged position, and as a defensive strategy may skew the portfolio to debt & money market instruments.  

From a risk standpoint, given that MAESF portfolio will typically have a dominant exposure to equity and equity related instruments—including unhedged equities, the scheme is suitable only if you have a moderate-to-high-risk appetite and have an investment time horizon of at least 3-5 years.

From a tax implication standpoint, an equity savings fund is classified as an equity-oriented mutual fund scheme. Hence, if redeemed within a holding period of one year, Short Term Capital Gain Tax (STCG) tax @ 15% will apply. And if redeemed after a period of 1 year, the Long Term Capital Gains (LTCG) in excess of Rs 1 lakh will be taxed @10%.

[Read: Why Comparing Returns to Risk Is More Meaningful!]

Table1: NFO Details

Type An open-ended scheme investing in equity, arbitrage and debt Category Hybrid Scheme - Equity Savings
Investment Objective To provide capital appreciation and income distribution to the investors by using equity and equity related instruments, arbitrage opportunities, and investments in debt and money market instruments. The Scheme does not assure or guarantee any returns.
Min Investment Rs 5,000 and in multiples of Re 1 thereafter Face Value Rs 10 per unit
Plans  • Direct

• Regular

Options
  • Growth

  • Dividend (Reinvestment & Payout)
Entry Load Not Applicable Exit Load For exit within 365 days from the date of allotment:
  • If redeemed within 1 year (365 days) from the date of allotment: 1%

  • If redeemed after 1 year (365 days) from the date of allotment: Nil
Fund Manager Mr Sudhir Kedia; and

Mr Mahendra Jajoo

Benchmark Index Nifty Equity Savings Index
Issue Opens November 26, 2018 Issue Closes: December 10, 2018
(Source: Scheme Information Document)

How will Mirae Asset Equity Savings Fund allocate its assets?

Under normal circumstances, the Scheme will allocate its assets as follows:

Table 2: MAESF's Asset Allocation


Instruments
Indicative allocation
(% of total assets)
(Minimum-Maximum)
Risk Profile
Indian Equities and Equity Related Instruments 65% to 90% Medium to High
i. Equities & equity related instruments (unhedged)* 20% to 45% High
ii. Equities, equity related instruments and derivatives including index futures,
stock futures, index options & stock options etc. as part of hedged / arbitrage exposure.*
20% to 70% Low to Medium
Money market instruments/debt securities Instruments and/or
units of debt/liquid schemes of domestic Mutual Funds
10% to 35% Low to Medium

In defensive circumstances, the asset allocation will be as under:


Instruments
Indicative allocation
(% of total assets)
(Minimum-Maximum)
Risk Profile
Indian Equities and Equity Related Instruments 15% to 65% Medium to High
i. Equities & equity related instruments (unhedged)* 10% to 40% High
ii. Equities, equity related instruments and derivatives including index futures,
stock futures, index options & stock options etc. as part of hedged / arbitrage exposure.**
0% to 55% Low to Medium
Money market instruments/debt securities Instruments and/or
units of debt/liquid schemes of domestic Mutual Funds
35% to 85% Low to Medium
(Source: Scheme Information Document)

*Equity and Equity related instruments include convertible debentures, equity warrants, convertible preference shares, equity derivatives etc. The Indian equities & equity related securities of companies includes those securities listed on stock exchanges in India and includes ADRs & GDRs. The net long equity exposure is aimed to gain from potential capital appreciation and thus is a directional equity exposure which will not be hedged.

**The derivative positions will be hedged against corresponding positions in either equity or derivative markets depending on the strategies involved and execution costs. On the total portfolio level, the scheme does not intend to take a net short exposure to equity markets. Unhedged positions in the portfolio (investments in equity shares without corresponding exposure to equity derivative) shall not exceed 45% of the net assets.

What will be the Investment Strategy?

To achieve its stated investment objective, MAESF will employ various strategies which seek to exploit available arbitrage opportunities in markets along with pure equity investments and investments in debt and money market instruments.

Equity investments

When investing in equity, the fund manager has the flexibility to invest across market capitalization in portfolio companies.

While constructing the portfolio, the focus would be to have strong growth companies, reflecting the most attractive investment ideas at all points of time. The universe of stocks will comprise majorly of companies having robust business models, enjoying sustainable competitive advantages as compared to their competitors and have high return ratios.

To avoid concentration risk and liquidity risk, the fund manager will try to have a large base of stocks in the portfolio. However, the fund manager does have the flexibility to follow a focussed approach as well.

Further, in pursuance to the investment objective of the Scheme, derivatives would be used to generate income through arbitrage opportunities between cash and derivative market and arbitrage opportunities within the derivative segment subject to SEBI (MF) Regulations. MAESF intends to take positions in derivative instruments like Index Futures, Stock Futures, Index Options and such other derivative instruments as may be permitted by SEBI from time to time.

Debt investments:

MAESF will invest in high-quality debt securities with a portfolio duration based on the interest rate view and money market instruments. The credit quality of the portfolio will be maintained and monitored by using in-house research capabilities of the fund house, as well as inputs from external sources such as independent credit rating agencies.

The investment team will primarily use a top-down approach for taking interest rate view, sector allocation along with a bottom-up approach for security/instrument selection.

Who will manage Mirae Asset Equity Savings Fund?

MAESF will be managed by the duo, Mr Sudhir Kedia and Mr Mahendra Jajoo.

Mr Sudhir Kedia will manage the equity portion of the Scheme. He has over 12 years of total work experience and is a Chartered Accountant (CA), Certified Management Accountant (CMA), and an MBA. He was appointed as the fund manager and key personnel of the Asset Management Company (AMC) last year, with effect from March 14, 2017. His primary responsibility includes Fund Management & Investment Analysis.

Prior to joining Mirae Asset Mutual Fund, Mr Kedia was associated with ASK Investments and

Currently, Mr Kedia co-manages the equity portion of Mirae Asset Hybrid Equity Fund (earlier known as Mirae Asset Prudence Fund) with Mr Neelesh Surana.

Mr Mahendra Jajoo will manage the debt portion of the Scheme. He holds over has over 27 years of experience in the field of financial services including 13 years of experience in Fixed Income fund management. Mr Jajoo is a Chartered Accountant (CA), Company Secretary (ACS) and Chartered Financial Analyst (CFA)          

At Mirae Asset Mutual Fund, Mr Jajoo is responsible for supervising all the debt schemes of the fund house. Prior to joining the AMC, Mr Jajoo was a Director with AUM Capital Markets Ltd. He has also been associated with organizations like Pramerica Mutual Fund (now known as DHFL Pramerica Mutual Fund), Tata Mutual Fund, ABN AMRO Asset Management Ltd and ICICI Group.

Currently, at Mirae Asset Mutual Fund he co-manages/manages Mirae Asset Hybrid Equity Fund (debt portion), Mirae Asset Cash Management Fund, Mirae Asset Dynamic Bond Fund, Mirae Asset Savings Fund, and Mirae Asset Short Term Fund.

The Outlook for Mirae Asset Equity Savings Fund:

While MAESF will mainly invest in equity and equity related instrument under normal circumstance and the balance in debt & money market instruments (including units of debt/liquid schemes of domestic Mutual Funds), how dexterously the fund manager shifts the asset allocation within equities––between unhedged and hedged portion––and from equities to debt during defensive consideration, needs to be seen.

So, the fortune of MAESF will be closely linked to how resourcefully the fund manager handles the asset allocation, and of course, the underlying instruments it holds in the portfolio, even as it follows a mix of a top-down and bottom-up approach to investing backed by certain research parameters.    

In an environment where the near-term sentiments in equity markets will be driven by macroeconomic conditions, global and domestic political developments, along with the outcome of upcoming state and Lok Sabha elections, the markets are expected to remain highly volatile.

Nevertheless, the mandate of the fund could come as precaution provided the fund manager uses it thoughtfully to construct the investment portfolio, both equity (including derivatives) and debt, plus even while exploring arbitrage opportunities.

To read PersonalFN’s view, click here.

[Read: Are You Still Looking For The Popular Funds Out There? Read This!]

PS: PersonalFN’s special report 5 Undiscovered Funds may help you invest in equity funds without taking any undue risk.

These undiscovered funds, recommended in the report, have passed through a stringent scheme selection criteria set by PersonalFN.

To know more about the Undiscovered Funds, click here.

Author: Rounaq Neroy


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 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, it 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

  1. Money Simplified Services Private Limited;

  2. PersonalFN Insurance Services India Private Limited ;

  3. Equitymaster Agora Research Private Limited;

  4. Common Sense Living Private Limited;

  5. Quantum Advisors Private Limited;

  6. Quantum Asset Management Company Private Limited;

  7. HelpYourNGO.com India Private Limited;

  8. HelpYourNGO Foundation;

  9. Natural Streets for Performing Arts Foundation;

  10. Primary Real Estate Advisors Private Limited;

  11. HYNGO India Private Limited;

  12. Rahul Goel;

  13. I V Subramaniam.

Disclosure with regard to ownership and material conflicts of interest

  1. ‘subject company’ is a company on which a buy/sell/hold view or target price is given/changed in this Research Report;

  2. Neither QIS, it's Associates, Research Analyst or his/her relative have any financial interest in the subject Company;

  3. 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;

  4. 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

  1. Neither QIS nor it's Associates have received any compensation from the subject Company in the past twelve months;

  2. Neither QIS nor it's Associates have managed or co-managed public offering of securities for the subject Company;

  3. Neither QIS nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject Company;

  4. 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.

  5. 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

  1. The Research Analyst has not served as an officer, director or employee of the subject Company.

  2. QIS or the Research Analyst has not been engaged in market making activity for the subject Company.

Definitions of Terms Used

  1. Buy recommendation: This means that the subscriber could consider buying the concerned fund keeping in mind the tenure and objective of the recommendation service.

  2. Hold recommendation: This means that the subscriber could consider holding on to the fund until further update. However, additional purchase via ongoing SIP can be considered.

  3. Sell recommendation: This means that the subscriber could consider selling the fund keeping in mind the objective of the recommendation service.

Click here to read PersonalFN’s Mutual Fund Rating Methodology

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



Add Comments

Comments
nmrshreedhar@gmail.com
Dec 06, 2018

If the fund holds upto 85% in debt under " defensive circumstances" , will it still be considered as an Equity MF for taxation purpose? Not clear from the above. regds
 1