ELSS Funds: ITI Long Term Equity Fund Review

ITI Long Term Equity Fund (ELSS Tax Saving Scheme)

Fund Manager : Mr. George Joseph and Mr. Pradeep Gokhale

Category : ELSS

Date of Inception : 15th July 2019

Benchmark : Nifty 500 TRI

ITI Long Term Equity Fund is a Tax Saving Mutual Fund scheme (ELSS) from the ITI Mutual Fund House.

Before we jump into analyzing this scheme further, let’s first try and get ourselves acquainted with ELSS mutual funds.

ELSS Funds meaning  
> ELSS funds are open ended diversified equity funds which are eligible for Tax Benefits on investment under section 80C of the Income Tax Act 1961.

> They provide dual benefits of saving taxes as well as the opportunity to get long term compounding benefits of equity investing.

> They come with a lock in period of 3 years, the least among all the tax saving instruments.

> They are not restricted by market cap segments or sectors and do not need to follow any strict mandate as is required by other equity schemes.

ITI Mutual Fund Investment Philosophy
ITI Mutual Fund prides itself on following the ‘SQL’ Investment Philosophy.

ITI Long Term Equity Fund Investment Philosophy
> Stock selection will be mostly driven by a bottom up approach.

> The fund will only invest in businesses which have a clear sense of strategy.

> The fund will be divided into core stocks and tactical stocks with core stocks being companies that are leaders in their respective fields.

> Focus will be more on quality rather than on quantity, thereby you can expect a good chunk of quality companies rather than a large number of mediocre companies.

> The number of stocks envisioned would be anywhere between 40-70 stocks.

> The fund will not be restricted to any particular market sector as such and will thereby invest across market segments.

Keeping in line with the ‘SQL’ philosophy, you can expect the fund to keep a keen eye on balance sheets, cash flow, business cycles, value, etc. among other important points to gauge whether it is worth investing into.

Despite the fund having a mandatory lock in period of 3 years, it would be prudent to stay invested in it for as long as possible to enjoy the true benefits of long term investing in compounding.

Fund Managers
The Fund will be co-managed by both Mr. George Joseph and Mr. Pradeep Gokhale.

Now let’s try and understand why having them at the helm gives the fund an advantage.

Mr. George Joseph
Mr. George Joseph has around two decades of experience and has previously held positions with Cholamandalam, Wipro, DSP Merrill Lynch, etc. to name a few.

His last stint was with ICICI Prudential Asset Management where he spent more than a decade managing funds in their Multicap, ELSS – Long Term Equity Fund, Child Care, etc. to name a few.

Mr. Pradeep Gokhale
Mr Pradeep Gokhale has around 23 years of experience and in his previous capacity has held positions at Care Ratings, Bombay Dyeing, Tata International, etc. to name a few.

In his previous capacity as that of Senior Fund Manager – Equities at Tata Mutual Fund, he had managed the following schemes.

Tata Large Cap Fund
Tata Large & Mid Cap Fund
Tata Multi Cap Fund
Tata India Tax Savings Fund
Tata Ethical Fund
Tata India Offshore Opportunities Fund and
Equity portion of Tata Hybrid Equity Fund

The Role of a Fund Manager in ELSS – Tax Saving Mutual Fund

> Even though the role of a fund manager is important in every fund, it gains extra significance in a Tax Saving Mutual Fund for the following reasons.

> Since the fund comes with a lock in period of 3 years, investors have a tendency to withdraw their investment after three years even though the longer you stay invested in equities, the better.

> With such investor behaviour, you would expect the fund to have frequent changes to their AUM and in such situations an experienced manager at the helm is priceless.

> Since most investors tend to withdraw their investment after the lock in period expires, it becomes all the more significant to have someone heading who has already seen and experienced various business cycles.

> This is important since knowing when to enter and exit businesses in a Tax Saving Mutual Fund becomes important since it coincided with fluctuating AUM.

What works for the Fund?

Fund managers
This cannot be stressed enough, here we have two very experienced of them managing it.

The Fund has been launched at a time when the market is going through a correction. During such a time, there may be opportunities available for businesses at reasonable prices.

Since this is a new fund, there should be no issues of liquidity.

For funds with a higher AUM, liquidity could be a major roadblock unless of course they are sitting on heavy cash.  

Let’s take the example of their ITI Multi Cap Fund to get a better understanding of buying at reasonable prices during a market correction.

As you can see from the image above, the fund has taken decent exposure to
    a)    Auto and
    b)    Pharmaceuticals sector.

Along with these two, it also has taken exposure to auto ancillaries.

With these sectors providing attractive prices, the fund house has taken reasonable exposure to them.

As previously mentioned, funds with a heavy AUM may struggle to replicate the same due to liquidity issues.

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Disclaimer: While due precaution has been undertaken in the preparation of this article, The Mutual Fund Guide or any of its authors will not be held liable for any investments based on the above article. The above article should not be considered financial advice and has been published only for your perusal. Due credit has been given in case wherever required, in case you feel any part violates any rights then do get in touch with us and we shall get it duly removed.  
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