Portfolio : A collection of investments owned by the same individual or organization.
Will : legal declaration of how a person wish his/her possession to be disposed after their death
Fund : An amount of money saved or collected for a particular purpose
Return : Profit or loss derived from an investment
Investor : An investor is any party that makes an investment.
In this type of mutual funds, your funds will be in invested in equities i.e. in the stock market..
Mutual Fund NFOs are nothing but commencement of a new scheme. During the NFO period the investors will be able to buy the units for its face value of Rs.10.
It is a type of a security whose value is derived from another underlying asset.
A set of assets which an investor holds. This may contain equities, mutual funds, insurance and other cash equivalents.
Wealth is accumulation of resources or as on date value of assets a person own. Commonly Net worth is the measure of Wealth of an individual.
Liquidity or marketability is the ability to convert an asset in to cash quickly.
ITI Mutual Funds has launched their ITI Long Term Equity Fund on July 15, 2019.
This NFO issue will be a new addition to the funds categorized under ELSS Tax saving schemes. This review of ITI Long Term Equity ELSS Fund will give you an idea of whether to invest or not.
Let’s see the basic details of the ITI Long Term Equity Fund.
NFO Name—ITI Long Term Equity Fund
Fund Type—Open-ended fund
NFO Open Date—July 15, 2019
NFO Close Date—Oct 14, 2019
Fund Category—Equity: ELSS
|Features of ITI Long Term Equity Fund|
|Available Plans||Growth, Dividend|
|Benchmark||NIFTY 500 TRI|
|Minimum Additional Investment||₹500|
|Minimum SIP Investment||₹500|
|Lock-in Period||3 years|
Why Should You Go for ELSS Funds?
First thing first, Equity Linked Savings Schemes (ELSS) is the tax saving Mutual Funds which give tax benefit under section 80C. But what makes it the most desirable tax saver under section 80C?
Among all other tax saving investment instruments under section 80C, ELSS funds have the lowest lock-in period—which is only 3 years. It also has the potential to give higher capital appreciation.
Review of ITI ELSS Mutual Fund Peers
This ITI ELSS Fund is an NFO from a relatively new fund house. It is impossible to project its future performance, let alone reviewing of ITI Long Term Equity Fund without any track record.
However, we see the performance of other existing ELSS funds. This should give you an idea of how ELSS funds can perform.
|Fund Name||Launch Year||Return Since Launch||3Year Return
|Axis Long Term Equity Fund||Dec 2009||17.06%||12.03%|
|DSP Tax Saver Fund||Jan 2007||13.41%||10.89%|
|*Data as on July 12, 2019|
These are two of the best performing ELSS funds as on July 12, 2019. They have shown a solid performance over the years as per the reviews. But this does not mean the ITI Long Term Equity Fund would perform the same way as well.
Before we get into the details and review of the ITI Long Term Equity Fund, we shall get to know the ITI Mutual Fund.
A Quick Review of ITI Mutual Fund
ITI Mutual Fund is one of the most recent AMCs coming into the mutual fund industry.
ITI Mutual Fund aims to offer opportunities to investors who look to create long term wealth. They have shown interest to achieve AUM of ₹10,000 crores in a decade of time and become one of the top players.
At present ITI Mutual Fund has three Mutual Fund Schemes, with the ITI Long Term Equity Fund as the latest inclusion.
What’s in ITI Long Term Equity Fund?
The ITI Long Term Equity Fund has the objective to provide long term capital appreciation. And they are planning to achieve this by investing predominantly in equity and equity-related securities.
The NFO of ITI Long Term Equity Fund offers units at a price of ₹10/unit. It is basic and common among all the NFOs.
i) Minimum Application Amount: Review
However, being new to the market, ITI Mutual Fund has an interesting feature. The minimum application amount of ITI Long Term Equity Fund NFO is only ₹500/- and in multiples of 500/- thereafter, which is relatively less.
But should it matter? Or does it make any difference for an investor? For investors looking for long term benefits, this cannot be considered a benefit, since the minimum application amount of other ELSS schemes are not very high in itself for investors to avoid.
ii) Asset Allocation
Asset allocation ratio of a scheme will be a key factor in determining the potential and performance of any mutual fund scheme. The ITI Long Term Equity Fund will have mixed assets of equity and equity-related securities and, short term debt and money market instruments.
|Instrument||% Allocation (Min-Max)||Risk Level|
|Equities and Equity Related Securities||80%-100%||High|
|Short Term Debt and Money Market Instruments||0%-20%||Low-Medium|
ITI Mutual Fund says it will be investing the ITI Long Term Equity Fund predominantly in equity and equity-related securities. However, “predominant” could only be an understatement.
As per their asset allocation, at least 80% of the ELSS fund will be invested in high-risk equity and equity-related securities at any given time. Considering this is ELSS fund—3 years lock-in of capital— this is a very aggressive approach. This approach will, in turn, reflect on the risks involved with the fund, keeping the risks always high.
Who are the Fund Managers?
The ITI Long Term Equity Fund will be co-managed by the two fund managers,
- Mr George Heber Joseph
- Mr Pradeep Gokhale
The duo is already managing the ITI Multi-Cap Fund together which was launched in April 2019. Apart from this, Mr George Heber Joseph is managing the ITI Liquid Fund, launched in April 2019.
Review of Existing ITI Mutual Fund’s Schemes
Leaving the ITI Long Term Equity Fund, ITI Mutual Fund has only two other funds and they are managed by the same fund managers as this.
|Fund Name||AUM||Return Since Launch|
|ITI Liquid Fund||28 Crores||1.33%|
|ITI Multi-Cap Fund||24 Crores||2.41%|
|*Data as on June 30, 2019|
It has been only less than 3 months for the ITI Mutual Funds. These funds are still in the building phase to find their position in the market. With just 2 months of progress, there is not much data to review a scheme. One can only say they are doing well, although it would still be a premature statement to say anything definitively.
Review of Potential Risks in ITI Long Term Equity
The ITI Long Term Equity Fund will have the standard investment risks as any other mutual fund scheme. These involve trading volumes, settlement risk, liquidity risk, default risk including possible loss of principal.
Some of the scheme-specific risks are:
Market risk, that arises due to vulnerability to price fluctuations which will affect the returns on the scheme.
Liquidity risk, that arises due to inefficient Asset Liability Management.
Concentration risk, that arises due to exposure to only a few securities.
Derivative risk, that arises due to investing in derivatives.
Credit risk, associated with the repayment of investment.
Performance risk, that arises due to the change in factors that affect the market.
Should You Invest in ITI Long Term Equity Fund?
If you have the time to wait for it to perform and show results, you may wait and watch. Otherwise, it’s a No—Do not invest.
The ITI Mutual Fund is a new kid on the block, there is not enough data to even take a calculated risk.
The ITI Long Term Equity Fund comes with a 3 years lock-in period; a mutual fund scheme with no underlying portfolio records can prove to be too costly. If you are all about tax saving and long term wealth creation, you can always go for the existing and performing ELSS funds.
We have seen two of the best ELSS funds in this review of ITI Long Term Equity Fund. Or any other ELSS fund with a good track record will be a better choice than taking blind risks such as investing in this.