Theme-based funds, the mainstay for Reliance Life fund basket, are making a mark. For the stock savvy, these bring more bang to their bucks
RELIANCE Life Classic Plan is a Type II Unit-linked insurance plan that offers a sum of both fund value and sum assured in the event of any unforeseen events at an annual premium as low as 20,000. The scheme offers eight investment options in equity and debt funds. Reliance Life fund basket is unique as it offers a couple of theme-based funds.
COST STRUCTURE:
The cost structure of Reliance Life Classic plan is economical. Though it has nil policy administration charges for a regular premium plan, this is offset by a higher premium allocation charge. The single premium option has administration charges of 480 per annum. The mortality charge, which is a cost on the policyholder to compensate for risk of death, is almost double in Reliance Life Classic Plan against that of the standard LIC rates.
BENEFITS:
Reliance Life Classic Plan offers an exhaustive cover of 30 times the annual premium to policyholders in the age bracket of 21-40 years. The plan also offers a unique exchange which, if opted, allows the investor to change the policy after completion of five years. There is no allocation charge in the year of exchange under the regular premium. Apart from this, the plan offers some riders like accidental benefits, health and term rider for enhanced sum assured. All these riders come with a cost.
PERFORMANCE:
Reliance Life Classic Plan has both equity as well as debt funds. Under the equity scheme, there are a variety of thematic funds, including infrastructure, energy and mid-cap funds. The performance of theme based funds is always sporadic. Currently, most of these funds are performing better than their respective benchmarks.
Though the infrastructure fund has fallen by 6%, it is much lower than the 11.2% drop in its benchmark. New Equity Fund and Pure Equity Fund have also performed in tandem with their benchmark. In the debt fund category, corporate debt fund has generated returns of 8.6% as against 6.4% of the benchmark. The gilt fund has not performed so well mainly due to the long average maturity duration of debt portfolio. Money market funds, which are low-risk funds, have generated an 8.9% return against 6%, its benchmark.
PORTFOLIO REVIEW:
Reliance Life Classic Plan offers various theme-}service portfolio different sector portfolio based funds allocations and . to of The that banking the due weight fund of to is regular which a sector in little of terms financial the equity is lim of ited to 7% in the equity portfolio of this scheme.Sectors, including oil and gas sector, and capital goods have a higher weight. The fund manager has slightly reduced exposure in the FMCG sector following increasing commodity prices. In some sectors, the fund manager has taken a contra view. For instance, the power sector, which has underperformed the major market indices in the past one year, forms a significant part of the portfolio. However, Infotech, which has been a market outperformer, does not form a sufficient part of the schemes equity portfolio.
DEATH / MATURITY BENEFIT:
Upon maturity, the policyholder receives the amount accumulated in the fund whereas in the case of death, sum of both fund value and sum assured will be received. For instance, say, a 35-year-old healthy male invests 30,000 pa in New Equity fund for 20 years. Assuming sum assured equivalent to 30 times the annual premium, in the case of any eventuality, would be 9 lakh. By the end of 20 years, assuming the rate of return of 6% and 10%, the fund value shall be 7,65,601, and 12,40,388 respectively, receivable at the maturity along with the maturity bonus. However, in the case of demise of the policyholder, the nominee receives the sum assured of 9 lakh, along with fund value then existing.
OUR VIEW:
It seems Reliance Life is trying to follow the success mantra of Reliance mutual fund, by adding a couple of thematic funds in the fund basket. However, for a longterm investment like insurance, such funds don't generate much returns. Those who are a little more stock savvy, can invest in thematic funds while the rest should stick to equity or debt schemes. The product offers exhaustive death cover at a decent cost structure, along with different types of riders.
