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HSBC Mutual Fund too has come out with HSBC Tax Saver Equity Fund, the first open-ended Equity Linked Saving Scheme from the fund house. (Note that every mutual fund can have one open-ended tax saving scheme and other ELSS NFOs have to be mandatorily close ended.)
HSBC Tax Saver Equity Fund too offers deduction under Sec. 80C and the minimum lock-in period would be three years as in any other ELSS. Investment expert Sandeep Shanbhag believes that this enforced lock-in offers the opportunity to the fund manager to take long-term calls without having to worry about creating liquidity for daily redemptions.
"To that extent, the performance of ELSS funds in general have been better than their open ended counterparts", he added.
Advisor Hemant Rustagi feels, "ELSS is one of the best options among the instruments eligible for tax benefits under section 80C as they provide an opportunity to participate in the equity market and also help save taxes while doing so."
Though experts believe that HSBC Tax Saver Equity Fund can be a good way for investing in equity, they do have their concerns:
High risk attached to potential for high returns
Rustagi says, "Though ELSS have the potential to give better return compared to other options under Section 80C, there is definitely some risk attached to it. This can, however, be tackled by investing thru SIP."
But, Anthony Heredia, Senior Vice President & Head of Sales & Distribution, HSBC Mutual Fund explains, "History suggests that higher the time frame of investment in equity, lower tends to be the risk of losing money.
Given that ELSS schemes require a three-year time frame from the investor, the risk of losing money could get mitigated to some degree. Conversely, the longer time frame of investment increases the potential for return. Investors should look at investing in ELSS schemes coming from a trusted brand name, with a proven track record of managing equity schemes, be it existing funds, or NFOs."
HSBC Tax Saver Equity Fund vs Existing ELSS
Experts feel that HTSEF does not have any unique feature that other ELSS funds do not possess, and as an investment strategy, investors would be better off investing with ELSS funds with a proven track record instead of taking part in New Fund Offers that have no special selling proposition.
However, Heredia clarifies that, "The ELSS guidelines allow for the launch of one open ended Fund per fund house to be launched, and hence this product launch augments the existing product offerings from HSBC MF. Additionally, ELSS guidelines prescribe the investment pattern, and hence it is difficult to differentiate between funds on investment parameters.
|
1-year |
Assets | ||
| Existing Equity Diversified Schemes |
Returns * |
Rank * |
(Rs in cr) |
| HSBC Equity Fund (G) |
34.9 |
51 /156 |
1,050 |
| HSBC India Opportunities Fund (G) |
42.0 |
27 /156 |
517 |
| HSBC Midcap Equity Fund (G) |
24.7 |
87 /156 |
351 |
| HSBC Advantage India Fund (G) |
23.0 |
98 /156 |
1,439 |
| * Figures as on December 13, 2006 | |||
Heredia added, "HSBC Tax Saver Equity Fund will follow a flexi cap approach to building the portfolio, which should help the fund manager, as it affords maximum flexibility to choose stocks across capitalization.
HSBC MF does have a proven track record across the equity funds it manages, and this should give additional comfort to investors. The HSBC Group is one of the largest managers of Indian equity in the world. This lends credible expertise to our investment management capabilities."
Conclusion:
Experts believe that, "If an investor decides to invest in this fund, he will have to go by the track record of the existing funds of the fund house to assess its capabilities.
On the other hand, some of the existing ELSS has an excellent track record. One can look at the quality of the portfolio and the extent of exposure to different market caps in these funds and then take a decision."
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