Being an ELSS scheme with a lock-in period of three years, the fund manager has the added flexibility to invest for the long-term.
Suraj Saraf
Principal Personal Taxsaver is an open ended equity linked saving scheme that was launched in the beginning of 1996. Its investment objective is to generate long-term capital growth. The scheme aims to provide investors returns that are better than the BSE 100 index. It has a mandate to invest at least 80% of the net assets in equities at all times.
Being an ELSS scheme with a lock-in period of three years, the fund manager has the added flexibility to invest for the long-term, and can afford to take extra risk in the portfolio.
The scheme’s performance has been very good over the years. Since inception it has grown at a compounded annualised rate of 35.81%, which is quite impressive. In the last one year, the scheme has delivered returns of 75.43%, which is better than its peers.
Principal Personal Taxsaver has a small corpus of Rs 248 crore as on October 2007, but it has seen robust inflows in the last quarter — the assets under management were just Rs 55.62 crore as of July 2007. This suggests that the continued good performance of the scheme has certainly caught investor’s fancy, ahead of the tax planning season in India.
The scheme has been steadily booking profits, as is reflected by the higher cash allocation in the last couple of
quarters.
The cash and equivalent investment is almost 25% of the total net assets, up from 5.6% in May 2007. The fund manger seems concerned about valuations in recent times, and has found few opportunities to deploy the fresh inflows.
Principal Personal Taxsaver has a higher exposure to midcap and small cap stocks. The exposure to large-cap stocks is only around 20% of the portfolio, which is among the lowest in its category. The scheme’s exposure to stocks with a market capitalisation of less than Rs 1000 crore is around 28%, which reflects the aggressive nature of the scheme.
The portfolio has seen a lot of shuffle of late. The fund manager has included a slew of large-cap stocks to the portfolio this month. Crompton Greaves (4.43%), Reliance Industries (4.15%) and Grasim (4.04%) saw a fresh entry into the portfolio, and are the top three holdings of the scheme.
Other new large cap inclusions are HDIL (2.71%), ITC (1.95%) and ONGC (1.86%). L&T and Infosys Tech were the two large cap stocks that the scheme moved out from. The scheme is optimally diversified with exposure to 40 stocks and 21 sectors.
As the tax saving season arrives for Indian investors, mutual funds will be certainly looked as a viable option because they provide high returns along with tax benefits.
Among the equity-linked saving schemes currently in the market, Principal Personal Taxsaver is certainly a good choice, but investors must be aware of the small-cap bias of the scheme.
The fund’s track record for more than a decade, good parentage and stable fund management augur well for the future.
By arrangement with mutualfundsindia.com, a unit of Icra Online
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