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The retirement plans offered by mutual funds are structured to meet the investment needs of investors planning for their retirement based on their risk profile and age group.
AMCs such as Tata, Franklin, UTI, Reliance and HDFC offer retirement plans with different options, across equity and debt portfolios.
These plans have a lock-in period of five years (or till retirement age, whichever is earlier). Under its Retirement Savings Fund, Tata Mutual Fund offers three choices of asset- allocation plans to investors for retirement planning — Tata Retirement Savings Fund — Progressive Plan, Moderate Plan and Conservative Plan. Each plan follows a different investment approach to cater to the needs of different investors at different stages of their lifetime.
Tata retirement savings plans, too, have a lock-in period of five years.
For the middle-aged
Tata Retirement Savings Fund - Moderate Plan is structured to suit investors in the 45-60 year age basket with medium risk profile, aiming to provide both growth and protection.
It invests around two-thirds of its portfolio in equities and the remaining in debt.
The regular plan of Tata Retirement Savings Moderate Plan recently completed seven years.
It has delivered a compound annualised return of 16 per cent since its launch.
The fund has also outperformed its respective benchmarks and category in various time-frames.
Though it comes under the solution- oriented category, considering the fund’s higher equity allocation, it can be compared with aggressive hybrid funds.
The scheme has delivered 13, 19 and 16 per cent annualised returns over three, five and seven years, respectively, while the aggressive hybrid fund category posted 10, 13 and 14 per cent returns during the same periods.
Portfolio composition
The fund has maintained an equity-debt ratio of 75:25 (on average over the past three years).
On the equity side, the scheme chooses high-quality growth stocks at reasonable prices based on five parameters — efficiency in use of capital, governance levels, earning growth prospects, valuation and liquidity. It cherry- picks stocks across market caps and sectors.
However, more than 60 per cent of its equity portfolio is tilted towards large-cap stocks. This has helped the fund deliver sound returns across equity market conditions.
On the fixed-income portfolio, till January 2018, the fund preferred to hold only government securities and CBLO (collateralised borrowing and lending obligation) instruments.
The fund then added highest-rated corporate bonds in its portfolio. As of November 2018, the allocation to corporate bonds was 18 per cent.
The average maturity of the debt portfolio is around a year.
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