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Reliance MIP

 

Reliance MIP - Invest Online

 

If you can stomach risks that are somewhat higher than holding pure debt funds then Reliance Monthly Income Plan (MIP) is a good option. With a return of 11 per cent annually in the last five years as well as since its launch in December 2003, this debt-oriented fund is amongst the top performers in the monthly income scheme category. This return is also a good five percentage points over its benchmark Crisil MIP Blended index.


With higher average portfolio maturity compared with quite a few peers, the fund's debt portfolio may deliver over the next few months if interest rate cuts do happen.

Suitability

If you have no penchant for risk then Reliance MIP will not suit you. For one, it is a debt-oriented fund, but can invest 20-25 per cent in equities as well. That means in times of steep equity declines, the fund can slip in to negative returns. Two, even among the category of debt-oriented funds, Reliance MIP can be risky as it tends to take aggressive debt calls in anticipation of interest rate movements. Still, thus far, it has compensated investors with returns for the risk assumed.


If you wish to diversify your equity laden portfolio with some debt, this fund is a good choice. Reliance MIP also has a good record of declaring steady and high quantum of dividends for those you opt for pay out. While the fund is not required to declare dividend regularly (although it seeks to), you can certainly expect it to provide you with some additional income stream, if you are looking for one.

Performance

Reliance MIP tops the five-year chart of debt-oriented funds and is in the top three over a longer period of 7 years. The fund's three-year rolling return, since its inception is an average 11.7 per cent compounded annually. That means, irrespective of when you invested, your average three-year returns would have been around this figure. HDFC MIP Long Term comes close to this number on a rolling return basis. But it is to be noted that HDFC MIP Long Term, often times, goes over 20 per cent on equities. For instance, as of November HDFC MIP had a 25 per cent exposure to equities as against Reliance MIP's 19 per cent.

Among the universe of MIP funds, Reliance MIP also scores well on a risk-adjusted basis too, measured by the sharpe ratio. Over a three year period, Reliance MIP would have delivered an IRR of 10 per cent annually had you invested through SIP. Lump sum returns over this period was 8.4 per cent.

That said, Reliance MIP has had a taste of bitter pill too. It did not have a great period between late 2007 and the first half of 2008, Besides being hurt by the equity downfall in early 2008, the fund had also anticipated an interest rate decline a little too early. As a result it suffered negative returns in the first quarter of 2008 and remained lack luster up to mid-2008.

But to its credit, it made up by gaining 14 per cent in the December 2008 quarter, when interest rate cuts began. The above is an illustration of the risky call the fund took, albeit delivering in the end.

Portfolio

Reliance MIP currently sports a portfolio with average maturity of 7.49 years. That's far higher than the maturity profiles of HDFC MIP Long Term Plan or Canara Robeco MIP. But if interest rate cuts act in its favour, then the fund can deliver more. The fund has a fifth of its assets in government securities and about 38 per cent in corporate bonds.

While a good proportion of corporate bonds have top rating, the fund has less than AAA-rated securities from Reliance Infrastructure and Hindalco Industries. As the interest accrual on these slightly riskier bonds could be higher, the fund may well adopt a hold on them to mitigate risks. Equities account for a fifth of portfolio value. SML Isuzu, Mahindra Forgings and Torrent Power are some of the interesting stock picks.


The fund is managed by Amit Tripathi and Sanjay Parekh. An exit load of 1 per cent will be charged by the fund for redemptions made within a year of allotment.

Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015

1.ICICI Prudential Tax Plan

2.Reliance Tax Saver (ELSS) Fund

3.HDFC TaxSaver

4.DSP BlackRock Tax Saver Fund

5.Religare Tax Plan

6.Franklin India TaxShield

7.Canara Robeco Equity Tax Saver

8.IDFC Tax Advantage (ELSS) Fund

9.Axis Tax Saver Fund

10.BNP Paribas Long Term Equity Fund

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