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.
Timing
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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