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SEBI’s recent directive on categorisation and rationalisation of mutual fund schemes has brought in more uniformity in the characteristics of similar types of schemes.
One of the categories under the SEBI directive is ‘conservative hybrid fund’, which is suitable for investors with medium risk profile, wanting some equity exposure.
There are 23 funds under this category which invest 10-25 per cent of their total assets in equity and the rest in debt instruments. The higher allocation to debt performs the task of protecting the downside, while the equity portion helps generate inflation-beating returns.
These funds are suitable for retirees or people nearing retirement who can shift part of their investments from high-risk assets to relatively low-risk funds.
Axis Regular Saver Fund is one such fund under the conservative hybrid funds category.
With the new category classification, the fund underwent change in its name from ‘Axis Income Saver Fund’ with effect from May 28, 2018. Other attributes of the fund remain unchanged.
The fund has invested 13-36 per cent in equities in the past five years, and allocated the rest to debt and money market instruments. As per the latest portfolio, the fund’s allocation to equity stood at 25 per cent.
The fund has delivered 8, 7 and 11 per cent annualised returns during one, three and five years, respectively, while the category posted 4, 7 and 10 per cent, returns. The fund has managed to beat category returns most of the time in the past, thanks to its large-cap orientation in equity.
However, the strategy did not bode well during the mid-cap rally that began in September 2013, which led it to underperform its peers such as Aditya Birla SL Regular Savings, Canara Robeco Conservative Hybrid and HDFC Hybrid Debt, that allocated higher to midcap stocks.
The fund’s performance in the last one year has been notable, thanks to its accrual strategy in debt. Many better-performing funds in the category that followed a duration strategy have struggled to generate good returns (average of 1-4 per cent) in the last one year, owing to rise in interest rates.
Axis Regular Saver, on the other hand, has been a chart-topper, generating 8 per cent returns in the last one year.
The fund’s accrual strategy, however, did not work in its favour in good years — in 2012 and 2014 — when interest rates were falling.
Portfolio composition
Over the past five years, the fund has maintained a well-balanced portfolio by allocating 13-36 per cent to equities and the rest to debt.
On the equity side, the ratio of large vs mid-cap stocks stood at 90:10 over the last five years.
Financial services (9.8 per cent), automobiles (4.8 per cent) and chemicals (3.2 per cent) are currently the top three sectors. HDFC Bank, Kotak Mahindra Bank and Bandhan Bank are the top three stocks.
In the fixed-income portfolio, the fund invests predominantly in high-rated corporate debt and G-Secs.
As per the latest portfolio, the fund has invested about 9 per cent in lower-rated AA and below-rated NCDs, including Renew Power Ventures and Northern ARC Capital.
The average maturity of the portfolio has been in the range of 0.6-2 years over the past five years.
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