Investors looking for guaranteed NAV plans can consider HDFC SL CREST as it tops the chart of such products in the market
GUARANTEED highest net asset value (NAV) plans are gaining prominence in the market. This is due to the fact that they satisfy customer needs and offer a new avenue for insurers to sell their services especially after the implementation of the new guidelines. The new Ulip season has a number of such plans. HDFC SL CREST is a unique guaranteed highest NAV plan launched by HDFC Standard Life Insurance. This is a short-term plan leaning more towards investment than insurance. The premium payment term under the plan is limited to five years and the policy tenure is fixed for 10 years.
The plan offers two investment strategies, namely, free asset allocation and highest NAV guaranteed option. The highest NAV fund guarantees a minimum of 15 or highest NAV during the initial seven years of the fund or the NAV on the date of maturity (whichever is higher) to the policyholder. The free asset allocation strategy provides five investment options (funds) for policyholders. One can choose from equity, debt or balanced portfolio. For instance, blue chip and opportunity are equity based, whereas short term and income funds are debt based. Those looking for a balanced portfolio can opt for the balanced fund and highest NAV guaranteed fund.
COST STRUCTURE
The cost structure of CREST is a little on the higher side, but it is worth the guarantee provided by the plan of a minimum of 15 net asset value (NAV). No other company in the industry has provided such a guarantee so far. The premium allocation charge is low. But the policy administration charges and fund management charge of the guaranteed NAV fund make the product a little expensive. Those opting for free allocation investment strategy need not worry, as the cost remains low.
BENEFITS
Apart from the minimum guarantee that the product provides, it has a unique feature that is not offered by any other company in the industry, that is a 30-day free look period. It is a time period within which a person can return the policy back to the company in case he doesn't find it suitable. Other companies offer a shorter free look period of 15 days.
The company also has initiated a marketing strategy wherein the company provides a year's assurance to change the existing product in case it does not suit the policyholder's needs. The policy also offers a settlement option, however, the same is not available under the highest NAV guaranteed fund option.
PERFORMANCE
Ulips are popularly known as an investmentcum-insurance product. Since the premium is invested in assets like equity and debt, it is important for investors to choose products as per their risk appetite and keep a track of the performance of their investment. Though CREST is a new product, a few funds offered in this product such as blue chip, income and opportunity funds have been running for the
past eight months. Opportunity fund is a mid-cap fund. It has been one of the top performers having generated absolute gains of about 26.8% over the past eight months. This implies that 100 invested in this scheme three years back would be worth 126.5 today. Blue chip fund is a large cap fund, but this fund has been unable to outperform its benchmark BSE 100. Short-term fund and balanced fund have been just launched. The highest NAV guarantee fund also is a new fund. The company will follow a conservative approach in managing this fund. It is most suitable for those who do not want to participate in the risk of volatility of the equity market
PORTFOLIO REVIEW
HDFC Standard Life Insurance follows a defensive investment strategy. It has been continuously reducing its exposure from financial sectors. The company is overweight in capital goods, consumer durables, and FMCG. The blue chip fund has the highest allocation in capital goods stocks. The company also has higher exposure to the healthcare sector.
The portfolio of short-term fund, balanced fund and guaranteed fund does not still exist, as they are quite nascent with very little asset under management (AUM). The fund manager has affirmed infrequent churning of the portfolio. Only 20% of the portfolio is churned on an annual basis.
DEATH/MATURITY BENEFITS
On maturity, the policyholder receives the accumulated fund value. If you have selected the highest NAV guaranteed fund option, the fund value will be computed on the basis of the NAV which will be the higher of Rs. 15 or the highest NAV during the initial seven years of the fund. This implies that 100 invested at Rs10 NAV would be atleast worth 150 on maturity. In case the NAV is more than 15, the fund value will increase accordingly. However, if the free asset allocation strategy is selected then the fund value will be the corpus prevailing in the investment option on the date of maturity. On sudden demise of the policyholder, the nominee will receive the higher of the sum assured or the fund value.
OUR VIEW
CREST is more like an investment product than an insurance scheme. The guarantee of minimum 15 NAV provided is an exceptional factor in the product. Also, the higher free look period is an added advantage. The past records of HDFC are also quite encouraging. Among the currently available guaranteed NAV plans in the market, HDFC CREST tops the chart.
