HDFC Children’s Gift Fund: The MF route

You can certainly help your little one’s dreams come true , if you plan early and invest wisely.

Among a range of alternatives available for long-term investments, HDFC Children’s Gift, a balanced mutual fund, is a moderate-risk avenue to achieve goals with a long horizon for superior returns.

The scheme invests in a blend of equity and debt, with a strong tilt towards the former. HDFC Children’s Gift has delivered better returns than its benchmark as well as even quality equity funds over a 10-year time-frame.

Consistent outperformer

The fund has managed to deliver consistent returns ahead of its benchmark — CRISIL Hybrid 35+65 - Aggressive Index — over one, three and five-year time frames. Its level of out-performance has been quite healthy, to the tune of 3-5 percentage points.

Over the last 10 years, HDFC Children’s Gift has delivered 14.9 per cent annual returns, which were much higher than peers such as ICICI Pru Child Care - Study Plan and SBI Magnum Children Benefit plan.

The returns were also higher than what the best equity funds delivered during this period.

An investor choosing the SIP route would have been able to generate 17.6 per cent returns in the last 10 years, making it highly suitable for long-term goals.

Across market cycles, the fund has delivered consistently.

Moderate risk in portfolio

The equity portion in HDFC Children’s Gift has hovered around 70-73 per cent over the years. Barring the top few stocks, in which exposure has been to the tune of 4-6 per cent, investments are highly diffused.

Some 50-60 stocks are part of the scheme most of the time. Large-cap stocks from the Sensex or Nifty dominate the investment pie.

The exposure to mid-cap stocks has been tempered over the last few years. From forming a third of the portfolio a few years ago, mid-cap stocks accounted for only 20-22 per cent in recent times. Thus, the risk levels have come down.

In the debt portion, the fund takes a safe approach with investment in government securities, or AAA, AA+ and AA rated bonds/NCDs of PFC, Tata Motors Finance, Tata Sons and SBI.

During volatile market conditions, the fund increases the cash position to about 5-7 per cent.

Churning of the portfolio is not vigorous, though exposure to under performing segments is pruned; pharma and software have been cases in the point over the past one year.

Investing for the child

There are two options — with and without a lock-in period. The first is with a lock-in period of three years or if you are investing for your child, until she turns 18, whichever happens later.

There are no exit loads in this option, though the investments are locked in till the condition mentioned earlier is met.

There is also another option without the lock-in. In case this option is taken, withdrawals for the first three years would attract an exit load of 3 to 1 per cent.

That is, an exit after one year would entail an exit load of 3 per cent, and so on. Units sold after a three-year period will have no exit loads.

As a part of your asset allocation, HDFC Children’s Gift must find a place in your core portfolio for funding a goal related to your child.

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