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Sunday, February 28, 2016

Axis Children Gift Fund Review


Axis Mutual Fund came up with an NFO (new fund offer) named as Axis Children's Gift Fund. This fund came up with an emotional tag of Children's Gift. The offer will be available from 18th Nov to 2nd December, 2015.


Axis Children's Gift Fund

Well, in my view this fund is using the major emotional tag of any parents i.e "Children's Future" of "Child Plan". To authenticate the fund offering, Axis provided the below facts about the cost of raising a child.

  • Cost of school education has risen by 150% in last 10 years.
  • In the last 5 years, average annual private expenditure for general education has shot up by 175%.
  • In the last 5 years, Average rise in the fees of Top 3 IIMs has been around 242%.

I don't have any second thought or negating the cost of education. But whether this fund alone is enough to meet the goal? Let us see the features of this mutual fund product.

  1. Investments can be made only in the name of a minor (<18 yrs at the time of investment).
  2. Unit holder till attaining Majority shall be represented by his / her parent or legal guardian.
  3. Parents, guardian, grandparents or relative can invest in the name of minor kid.
  4. You have both Regular and Direct Funds (DEFAULT WILL BE DIRECT).
  5. This plan comes with lock and no lock in facilities. You can opt anyone. In case of lock-in,  investment will be locked-in till the kid is 18 years of age. Investment may be redeemed after kid is 18 years of age or 3 yrs, whichever is later.  In case of no lock-in, investment will not be locked-in till the kid is 18 years of age & can be redeemed at any point of time at NAV based prices subject to exit load.
  6. Exit loads are structured as-3% if exited within 1 year, 2% if exited after 1 year but before 2 years, 1% if exited after 2 years but before 3 years, No exit load after 3 years.
  7. Fund Options-Growth, Dividend (Dividend Payout and Reinvestment Facility-reinvestment option is available under No Lock-in sub-plan only).
  8. Asset allocation will be like 25% to 55% in Debt and money market instruments, 40% to 60% in Equity and Equity related instruments and 5% to 15% in Cash-Futures Arbitrage.
  9. Benchmark will be 50% CNX Nifty + 50% Crisil Composite Bond Fund Index.
  10. The full detail of the NFO will be available HERE.

Now let us review the fund from investors point of view-


# Why to invest in NFO when there are so many old funds which have a track record to judge?

# This is the typical equity mutual fund. But used the name as Children's Gift Fund. However, for your kid's education or marriage, you can invest in existing and consistent performed fund.

# Never be emotional with the products which claim to be meant for your kid's planning.

# This fund will have heavy exit loads if you planned to withdraw within 3 years. So if the fund is not performing well, you have to wait for at least 3 years to be out of it.

# I don't think it is necessary to provide two facilities like lock-in and no lock-in.

# This fund is treated as equity mutual fund. However, this fund not answers about how one must invest in debt category to manage debt:equity. Investing in equity fund alone is not a right strategy of investment. One must have debt category too.

# The only new point of what I saw is, this fund uses the arbitrage opportunity available in market to the extent of 5% to 15% of your portfolio.

# Notice the benchmark. It is 50% CNX Nifty and another 50% Crisil Composite Bond Fund Index. Therefore, if the fund claim to beating the benchmark, then it does not mean that it is beating NIFTY. Because, only 50% of the benchmark returns are linked to NIFTY.

# When the fund is meant for long term goal of kid's education, then why it is providing dividend payout option?

# In my view, it is nothing but a gimmick to utilize the emotions of parents for investment towards kid's education. Nothing new to offer.

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