HDFC Children's Gift Fund - Investment Plan: A gift crafted for children

Seven mutual funds, including Axis, HDFC, ICICI Pru and UTI, offer schemes that are specially designed to help investors save for their child’s future needs such as education and marriage.

These funds give investors the option to invest in equity-oriented or debt-oriented plans. For instance, HDFC Children’s Gift Fund offers two plans — Savings and Investment. The Savings Plan invests up to 20 per cent in equity with the rest of the funds invested in debt. The Investment plan can park 40-75 per cent in equity assets.

These funds are suited for investors with medium risk profile. These funds are not eligible for tax benefit under Sec 80C.

The investment can be made only in the name of a minor child less than 18 years old on the date of the investment through the minor’s bank account. The applicant can be the parent, step-parent, grandparent, adult relative or friend and the investment is treated as a gift.

HDFC Children’s Gift – Investment plan is a relatively better performing fund among the five child funds that invest more than 65 per cent in equity. The fund provides both options — compulsory lock-in (till the child attains the age of 18 years or three years from allotment, whichever is later) and any-time exit. Under the any-time exit option, an exit load of maximum 3 per cent is charged if redeemed within one year.

This fund provides personal accident insurance to the guardian. The cover is 10 times the value of the outstanding units subject to a maximum amount of ₹10 lakh per unit holder. The cover is provided to the parent or legal guardian and not to the child. The compensation is payable to the child.

The fund has been an outperformer among peers in most of the time-frames. Investment through the systematic investment plan (SIP) route in the fund has given annualised returns of 15, 18 and 17 per cent for three-, five- and seven-year periods, respectively, while the category average was 14, 17 and 15 per cent, respectively.

The fund has maintained a well-balanced portfolio comprising equity and debt, with a mix of 73:27 respectively (on average over the last three years). On the equity side, the fund favours businesses with superior growth prospects and good management, at a reasonable price. The large- vs mid- and small-cap ratio stood at 70:30 as per the latest portfolio.

Financials, automobiles and FMCG are the top three sectors while HDFC Bank, Reliance Industries and ICICI Bank are the top three stocks. The debt portion is skewed towards G-Secs, with 14 per cent allocation. Allocation to AA-rated corporate bonds is a lower 3.3. per cent. The average maturity of portfolio as of April 2017 was 7.7 years.

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