Axis MF’s Equity Saver Fund has met with a reasonably good response from investors. The NFO which closed for subscription on August 10 has mopped up Rs. 600 crore.
The fund has received close to 30,000 applications across all client segments, said Karan Datta, Chief Business Officer, Axis Mutual Fund.
There has been a spate of equity savings fund launches in the recent past. Kotak and JP Morgan were amongst the earliest ones to launch such funds which dabble in equity, arbitrage and debt. Very recently, Tata MF restructured its Monthly Income Plan into Tata Regular Savings Equity Fund.
After the changes in tax structure of debt funds, a lot of investors have flocked to this new category which claims to offer safety coupled with equity like tax benefit. This is evident by the growth in assets of the recently launched equity savings funds. Kotak MF’s Equity Savings Fund which was launched in October 2014 collected Rs. 240 crore in NFO. Now, its AUM has grown to Rs. 738 crore. JP Morgan’s Equity Income Fund collected Rs. 190 crore during NFO. The fund’s size has grown to Rs. 654 crore now. Similarly, Birla Sun Life MF’s Equity Savings Fund which mopped up Rs. 139 crore during NFO has seen its AUM grow to Rs. 335 crore now.
Financial advisors say that these funds are better alternative to MIPs which offer equity exposure coupled with safety.
Hemant Rustagi of Wiseinvest Advisors says that these funds are good from a tax efficiency perspective. “These funds are ideal for investors with a time horizon of 12 to 18 months. The arbitrage exposure can protect the portfolio from any downside in equity markets. With minimum risk these funds provide an opportunity to participate in equities. The debt portion would also be safe as they don’t plan to take any duration calls. If equity markets perform well these funds can give double digit returns.”
Unlike earlier, debt fund investors now have to stay invested for three years to qualify for long term capital gains tax. Also, debt funds now attract a higher tax of 20% (with indexation) unlike 10% earlier.
Thus, fund houses have packaged these funds in such a way that they offer better tax efficiency, equity exposure coupled with safety.
However, the fate of this category hangs in the balance as many industry officials feel that the government may take away the tax arbitrage which these funds enjoy.
