Two fund houses have come out with 10-year close ended ELSS. While UTI has launched sixth series of its UTI Long Term Advantage Fund, BOI AXA has launched its first series of BOI AXA Midcap Tax Fund- Series 1. The NFOs of both these schemes are currently open for subscription.
Debashish Mohanty, Country Head, Retail Business, UTI Mutual Fund believes that close-ended tax structure in ELSS is good for fund managers and investors. “In close-ended structure, fund managers do not have worry about redemptions. These funds also encourage the investors to stay put for long term. Also, it prevents the investors from churning their portfolio based on 1-year rankings,” says Debashish.
Alok Singh, Head - Investments, BOI AXA Mutual Fund feels that a close-ended structure allows fund manager to take long-term calls. He says that a 10 year close ended ELSS gives time to fund manager to deliver alpha.
BOI AXA Mid Cap Tax Fund will primarily invest in mid cap companies. It will invest at least 65% in midcap stocks, up to 35% in other equity and equity related securities and up to 35% in debt and money market instruments.
Sharing the rationale for launching a midcap tax saving scheme, Alok says that the fund house believes that midcap stocks will benefit from earnings recovery. “We expect corporate earnings will recover and midcap stocks will be the biggest beneficiaries of this revival. In addition, SEBI’s latest circular says that mid cap companies are those falling between 101st and 250th based on market capitalization. This reduces risk in the portfolio as these companies are well established,” says Alok.
However, Mumbai-based Vishal Dhawan of Plan Ahead Financial Advisors does not agree. “Investors invest in ELSS to save tax. Other products through which investors can get tax benefits are insurance and PPF. These products are low-risk products while mid-caps comes with considerable risk. In my view, investors should invest in existing open-ended ELSS having good track record,” says Vishal.
