Mutual Fund Investment: If you are an old generation investor then this fund is ideal for you – if you are an old generation investor then equity saving fund is ideal for you
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All mutual fund companies have exposure
Equity Savings Fund has exposure to almost all mutual fund companies. This includes many companies including HDFC, ICICI Prudential, Tata, Mahindra Menulife, SBI, Nippon India. But among these, the Assets Under Management or AUM of ICICI Prudential Equity Savings Fund is the largest in the category. Presently the AUM of this Equity Savings Fund is Rs 4,916.95 Crore. The net equity level of this fund is usually in the range of 15-20% along with stock arbitrage of 50-55%. Thus, the gross equity level remains at around 70%. The remaining 30% is allocated to debt. Due to this approach, the fund is well positioned to navigate rising or falling equity markets.
better position to prevent risk
Given the nature of this fund, it can be said that this fund is better positioned to hedge the downside risk as compared to regular equity funds or aggressive hybrid fund categories. Also, the fund has the potential to give higher returns as compared to regular debt funds or traditional financial investment avenues. And, at the same time it also has the potential to save tax. Given that the total equity allocation is always maintained at 65% or above. It may be noted that an Equity Savings Fund is treated like an Equity Fund for tax purposes.
It gives stability to the portfolio
ICICI Prudential’s approach of a combination of arbitrage, fixed income and covered calls provides stability to the portfolio. This is one aspect that fixed income investors are always on the lookout for. Only then it can be taken advantage of as a source scheme for Systematic Transfer Plan (STP), considering it as an alternative to post-tax debt schemes. And those looking for a complementary strategy to parking funds apart from arbitrage or debt can also consider this.
It increases your capital
The equity component in the portfolio brings growth or capital appreciation. Whereas, the debt and arbitrage component provides stability to the portfolio by generating steady returns. Also it helps in protecting the downside of the portfolio. Generally, fund managers prefer large caps on broad markets for equity allocation. But, when it comes to debt, the allocation is in the form of AAA rated paper or shorter duration government securities.
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