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Axis Long Term Equity Fund: Star Performer
Thu, Jan 07, 2016
Source : Khyati Shah, Citrus Interactive

Axis Long Term Equity Fund is an open-end equity-linked savings scheme (ELSS) fund with 3 year compulsory lock-in. The investment objective of the scheme is to generate income and long-term capital appreciation from a diversified portfolio of predominantly equity and equity-related securities. The fund was launched in December 2009 and is benchmarked against the S&P BSE 200 Index. The fund has an AUM of Rs. 6,497 crore as on November 30, 2015 which has gone up by 3,298 crore as compared to the last year November 30, 2014 (3,199 crore).

 

Performance

Axis Long Term Equity Fund has a very good performance track record of consistently outperforming its benchmark index and the equity-linked savings scheme category average across all time frames as shown from the table given below. Its performance since inception has been better than its benchmark by over 12.86 percentage points. The fund has been top ranking fund in 3 and 5 years’ time frame and it ranked second in 2 years frame time. It has been in the top quartile of its peer-set across all time frames as shown from the table given below.

Scheme Name

1 Year

2 Years

3 Years

5 Years

Since Inception

Axis LT Equity Fund(G)

6.70

33.16

27.36

18.67

20.47

S&P BSE 200 Index

-1.48

15.53

11.69

5.91

7.61

Category Average

3.50

24.55

18.01

10.53

NA

Rank

10/36

2/35

1/34

1/33

NA

Figures are in % as on December 31, 2015; Returns above 1-year in Compounded Annual Growth Rate (CAGR)

When we look at the calendar year returns it’s quite clear that Axis LT Equity Fund has beaten its benchmark and category average in all the last five calendar years. The fund has been top ranking fund in two out of the last five calendar years and in the year 2014 it was on third rank. In the year 2012 and 2015 it was in second quartile of its peer-set.

Scheme Name

2011

2012

2013

2014

2015

Axis LT Equity Fund(G)

-14.76

33.68

16.51

66.18

6.70

S&P BSE 200 Index

-26.95

30.98

4.38

35.47

5.79

Category Average

-23.77

31.86

6.40

50.36

3.50

Rank

1/33

16/34

1/34

3/35

10/36

All figures in %

Risk: In terms of measures of risk such as standard deviation and beta (measured over last three years), the fund has taken lower risk compared to the category median.

 

Standard Deviation

Beta

Axis LT Equity Fund

0.87

0.79

Category Median

0.93

0.9

 

Risk-adjusted Returns: In terms Treynor and Sharpe ratio (measured over last three years), the fund has provided higher risk-adjusted returns than the category median.

 

Treynor

Sharpe

Axis LT Equity Fund

0.11

0.12

Category Median

0.07

0.07

 

Portfolio Characteristics

Sector Concentration:  The fund’s concentration in the top 3, 5 and 10 sectors is higher than the category median highlighting higher risk of the fund.

 

Top 3

Top 5

Top 10

Axis LT Equity Fund

38.1

52.64

73.81

Category Median

36.39

47.38

68.55

Company Concentration: The concentration of funds in top 3, 5 and 10 companies in its portfolio is also higher than the category median highlighting higher risk of the fund.

 

Top 3

Top 5

Top 10

Axis LT Equity Fund

21.66

31.65

50.11

Category Median

17.69

25.89

42.68

Higher Sector & Company Concentration signifies the high risk profile of the fund.

Number of equity holdings: The fund currently holds 36 stocks in its portfolio (Nov 30, 2015), which is lower than the median stock count for the equity-linked savings scheme category, which currently stands at 47. The fund has held a concentrated portfolio at the stock level compared to the category. Over the past five years the fund has always had a diversified portfolio with the number of equity holdings over this period averaging 40.

Cash allocation: Its cash allocation at the end of November 2015 was 1.96 per cent which is lower than the median cash allocation for the equity-linked savings scheme category, which currently stands at 2.90 per cent. The average cash allocation for last five years is 4.36 per cent. Its maximum allocation to cash over last two years was 4.06 per cent in February 2014 and lowest was -0.004 per cent in August 2015. In 2015 it had an average cash allocation of 1.67 per cent. Thus overall the fund maintains low allocation to cash.

The top 5 sectors in the portfolio had an allocation of 52.64% which is higher than the category average of 48.21%. The top 5 sector include Bank - Private, IT - Software, Pharmaceuticals & Drugs, Finance - Housing and Auto Ancillary.

The fund’s exposure to cyclical stocks currently is 70.08% followed by Services with 13.53% and Defensives with 13.32%. The Top five holding are HDFC Bank Ltd., Kotak Mahindra Bank Ltd., Tata Consultancy Services Ltd., Housing Development Finance Corporation Ltd and Sun Pharmaceutical Industries Ltd.

In the last six months the fund has bought Coffee Day Enterprises Ltd. whereas Gujarat Pipavav Port Ltd. has been dropped from the portfolio.

Thus, based on criteria such as equity count, sector concentration and company concentration, one can conclude that the fund has a concentrated portfolio.

 

Process

The Fund will invest in a diversified portfolio of strong growth companies with sustainable business models. Though the benchmark is BSE-200, the investments will not be limited to the companies constituting the benchmark. The Fund will have the flexibility to invest across the market capitalization spectrum (i.e. Large, mid and small cap companies) and across industries / sectors. The companies would be individually researched and selected only when the fund management team has satisfied itself on robustness of the company’s business model, sustainability of its competitive advantage and the credibility of its top management team. The Fund will endeavour that the corpus of the scheme remains fully invested in equity and equity related instruments at all times.

The fund looks at companies that can sustainably grow profits and generate wealth over 3-4 years. This allows the fund manager to overlook short term volatility of the stock price as well as any temporary hiccups in the company’s earnings. Further the fund manager works completely on a bottom-up basis i.e. judging individual stocks purely on their prospects without trying to worry about the overall market direction or what the market benchmarks are doing. This has allowed the fund to create tremendous value for investors since its inception.

The fund’s expense ratio is 1.95% which is much lower than the category average of 2.39%. Since the fund is an equity-linked savings scheme (ELSS) fund it comes with a three year compulsory lock in period and nil exit load. Minimum investment in the fund is Rs 500.

 

Fund Manager

The fund is managed by Jinesh Gopani who is equity fund manager at Axis Mutual Fund. Mr. Jinesh Gopani has total experience of 13 years in the capital markets of which 4 years are in equity fund management. Mr. Gopani holds a Master`s degree in Management Studies from Bharati Vidyapeeth Institute of Management Studies and Research (Mumbai University). Prior to this, he worked as portfolio manager for Birla Sun Life Asset Management Company and Voyager India Capital. Other funds managed by Jinesh Gopani are Axis Income Saver and Axis Hybrid Series 5, 6, 7.

 

View

Investors can look at ELSS to avail tax benefits as funds under this category are eligible for a deduction up to an investment of Rs 1.5 lakh under Section 80C of the Income Tax Act.

All in all, those looking for an ELSS fund with an excellent track record may invest in this fund.

 
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