Current NAV: Rs 41.40 (Dec 10, ’08)
52-Week High NAV: Rs 55.70 (Jan 7, ’08)
52-Week Low NAV: Rs 39.40 (Nov 20, ’08)
Fund Managers: Anand Radhakrishnan, Sachin Desai, Vivek Ahuja
Following in the footsteps of UTI’s pension fund, Franklin Templeton launched its pension scheme in March 1997 and till date, is the only private sector fund house to have launched such a scheme. The fund’s investment structure is similar to that of URBP with a 60:40 investment ratio in debt and equity, respectively.
PORTFOLIO:
Investors may find it surprising to see a debt-oriented balanced fund having an investment of over 30% in equities, despite the adverse market conditions. While the fund’s equity exposure has declined from 40% to 30% in the past one year, given the market volatility in ’08, even 30% equity exposure appears to be on the higher side. However, the management has aptly justified its strategy of having an adequate equity exposure.
Since the fund is meant only for longterm investors, the management feels there is no point in changing exposures to different asset classes based on short-term market movements. At the same time, the fund has ensured adequate liquidity and relative safety for its equity exposure by incorporating large-cap stocks in a very high proportion.
The fund’s equity investment in largecaps is more than 85% at any given point of time. As far as its debt portfolio is concerned, the fund focuses on nonconvertible debentures with minimum exposure to securitised debt.
PERFORMANCE:
If one compares the performance of this fund vis-à-vis URBP, over the long term, TIPP clearly has an edge over its competitor. The fund has a history of outstanding performances, beating the category average on almost all occasions since ’03, when it returned a whopping 42.2%, vis-à-vis the category average of 27.6%. While in ’05, TIPP’s 16.5% returns did lose out to URBP’s 21.8%, it recovered in ’06 by generating almost 19% returns, even as the category average stood at 14%.
TIPP continued its feat in ’07 as well. However, in ’08 so far, its performance has lagged that of URBP. Its year-to-date trailing returns as on December 11, ’08 stand at - 24.6%, against the category average of - 10.7%. In the past six months alone, the fund has lost about 13%.
A high equity exposure may be construed as one of the reasons for this decline. But since TIPP has a very long-term investment mandate, a healthy performance in future can sideline these short-term hiccups.
INVESTORS’ DIGEST:
Considering its long-term investment mandate, TIPP has stringent exit rules, which may be stricter than those of URBP. TIPP mandates a compulsory three-year lock-in period and while one can redeem investments post the lock-in period, investors have to pay a penalty of 3% as exit load.
The maturity period for the scheme is 58 years age and the exit load is waived off only if the investment is redeemed after attaining this age.
The fund also calls for a minimum investment of Rs 10,000 during the period of investment, failing which, the exit load can be as high as 10% at the time of redemption. But this load may be waived off under spe cial circumstances like serious illness, education requirement, housing necessity, financial
hardships, loss of job, bankruptcy etc, sub ject to submission of proper documents.
TIPP has been quite regular in paying dividends to those who have opted for the dividend option. It declares dividends annually by the end of the calendar year; it has already announced a dividend of 12% for ’08. Just like any other pension fund, TIPP is also eligible for tax benefits under Section 80C of the I-T Act.
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