This fund may not be one of the most exciting offerings among tax planning funds but what sets it apart is its downside protection capabilities. In the rising market, the fund delivers close to the category return but it shines during the market downturns.
In 2008, it shed 49.22 per cent, when its peers were down 55.67 per cent and was the third best performing fund in the tax-planning category. And, this was done without aggressive cash calls.
The large-cap bias it maintains, always helps in limiting the downside.
Unlike its peers, the fund is never seen boarding heavily on lower-cap stocks.
In the recent bull run (March 9, 2009 to November 30, 2009), the fund turned in 101.37 per cent against the category's 104.17 per cent.
The fund manager adheres to a buy and hold strategy. This can be seen from the sectoral allocation. Except for a few months in 2004, financial services has been among top allocations, currently being 26 per cent.
Also, since April 2006, allocation to the engineering sector has rarely gone below 10 per cent. Some of the favourite picks of the fund manager are Infosys Technologies, Larsen and Toubro, Grasim Industries, Reliance Industries, Cummins India.
With 50 stocks in the portfolio and the top five holdings accounting for 29 per cent of the portfolio, the fund looks fairly diversified as compared to its peers.
The fund is a good pick for the conservative set of investors who want a good night's sleep, as compared to top-notch returns.
FIDELITY TAX ADVANTAGE
Launched in January 2006, the fund is relatively new in the tax planning category but has made a mark. In the three years ending November 30, 2009, the fund delivered an annualised return of 13.38 per cent against the category return of 7.31 per cent.
Although its performance during the market run-up has been average, it protects against the downside. Since its launch, the fund has guarded investors better than other tax planning funds. The bias towards large-cap stocks and a diversified portfolio has helped the fund but the trade-off has been in returns during the market rally.
In the recent bear run (January 8, 2008 to March 9, 2009), the fund shed 50.56 per cent against its category's 56.92 per cent. While in the bull run (March 9, 2009 to November 30, 2009) that ensued, it delivered 105.57 per cent, almost equal to the category's 104.17 per cent.
The fund largely maintains a buy and hold strategy. But, it does take short-term bets. Of the 186 stocks it has invested in so far, 66 of them (35 per cent) have appeared for five months or less.
With a large-cap bias and diversified portfolio, the fund is for the conservative set of investors who want a good night's sleep over trailblazing returns.
CANARA ROBECO EQUITY TAX SAVER
Given the performance in 2007, 2008 and the recent market run up, it is a worthwhile choice in the tax planning category. In the three years ending November 30, 2009, it has been the second best performer in tax planning category, giving 16.77 per cent against the category's 7.31 per cent.
In 2006, it delivered 31.46 per cent against the category's 29.77 per cent. In 2007, it beat its category by seven per cent. Again in 2008, when the market tumbled, it shed 46.85 per cent against 55.67 per cent fall of an average equity tax planning fund.
The aggressive cash and debt bets taken by the fund manager in the second half of 2008 helped the fund.
In the recent rally (March 9, 2009 to November 30, 2009), the fund has delivered an astounding 125 per cent against the category's 104 per cent rise.
Some sectoral bets worked in favour of the fund. Allocation to construction stocks was increased from eight per cent in December 2005 to 24 per cent in February 2006. The fund also benefited from allocation to the engineering sectors in 2006. Increased allocation to energy sector also worked for the fund in 2007.
Since 2007, with an average of 35 stocks and the top 10 holdings accounting for around 43 per cent of the portfolio (in line with the category), the fund looks fairly diversified.