Mutual Funds

Tailored to fit the seniors

Dhuraivel Gunasekaran | Updated on March 08, 2018 Published on March 03, 2018

The fund provides protection by investing 70 per cent in debt and 30 per cent in equities

In India, there is a wide range of guaranteed and market-linked retirement products for investors to build their retirement kitty. Aside from the default options such as Public Provident Fund (PPF), Employees’ Provident Fund (EPF), Unit Linked Insurance Plans (ULIPs) and National Pension Scheme (NPS), there are few solution-based mutual funds tailored to the needs of investors to accumulate their retirement corpus.

For retirees and those nearing retirement, mutual funds offer choices of asset allocation plans based on their risk profile. Tata Retirement Savings Fund - Conservative Plan is one such, structured to suit retirees with low to medium-risk profile.

The objective of the plan is to provide capital protection by investing at least 70 per cent of the net assets in debt and up to 30 per cent in equities.

Investors looking to shift their retirement corpus from relatively risky assets to low-risk investment options can consider the fund (given its marginal allocation to equity). An exit load of 3 per cent is charged if redeemed before the age of 60. No exit load is charged after 60.

Decent performer

Within the hybrid — debt-oriented aggressive category (allocating 25-30 per cent into equities) — Tata Retirement Savings Fund - Conservative Plan outperformed the category across all time-frames. The scheme has delivered 9, 8.5 and 11.4 per cent annualised returns during one, three and five years, respectively, while the category posted 8.3, 8 and 10.6 per cent returns.

The fund has performed well across interest rate cycles over the last seven years. In a rising rate scenario too, the fund has been able to cap losses well, thanks to its efficient duration calls and strategy to stick only to highest-rated debt instruments. During the period of rising rates between May 2013 and April 2014, and July 2017 and Feb 2018, the fund delivered an absolute return of 6.8 and 2.6 per cent respectively, while the category registered 5.4 and 1.8 per cent.



Balanced portfolio

The fund has maintained an equity-debt mix of 29:71 (on average over last three years). It has participated actively in the equity rallies, thanks to one-third of its equity allocation into midcaps.

On the fixed income portfolio, the fund has played both the accrual and duration theme well. During the 2014 bond rally, the fund raised its average maturity to more than 12 years. The fund has taken medium duration calls (five to eight years over the last two years).

The portfolio’s average maturity is 5.3 years and yield-to-maturity is 7.2 per cent (as of January 2018). The debt portion is now skewed towards G-Secs and high-rated corporate bonds (only AAA PSU bonds).

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