Axis Long Term Equity Fund Review

 Axis Long Term Equity Fund (ELSS)

Fund Manager
: Mr Jinesh Gopani

Category: ELSS (Tax Saving)

Date of Inception: 29 December 2009

Benchmark: S&P BSE 200 India TR INR

tax on mutual funds

What is Axis long term equity fund?
Axis Long Term Equity Fund is a Tax saving mutual fund that allows an individual or HUF to invest in a diversified equity mutual fund to claim a deduction up to Rs. 1.50 Lakhs under Section 80C of the Income Tax Act 1961.

Elss tax saving funds have the lowest lock in period among tax saving instruments.

Click Here to read more about elss funds

  1. An interesting fact about this elss scheme is that it was initially named as Axis Tax Saver Fund but was later renamed as Axis Long Term Equity Fund around 2011. This is interesting because the earlier name made it evidently clear that it was an elss tax saving mutual fund whereas the same cannot be said about the current name.
  2. Axis elss fund has the distinction of being the largest tax saving mutual fund as far as AUM is concerned. It is quite obvious that having a sister private bank as a distribution channel has been of great help in promoting this fund and thereby gathering such a huge AUM.
  3. In fact as on 29th February 2020, Axis tax saver fund had 50% more AUM than its closest competitor.
  4. There is no denying that the fund has been a consistent performer for quite sometime now but the takeaway from this experience is that mere performance unfortunately is not sufficient to accumulate AUM for mutual fund companies, a sister bank as a distribution channel is of big help in promoting it.
  5. It should therefore come as no surprise that the top 3 mutual fund companies in India also have sister banks as their distribution partners from where they receive the maximum share of their inflows. 

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Axis long term mutual equity fund portfolio
Ever since its inception, Axis elss scheme has been functioning more or less like a Large cap fund as far as its investing style and allocation is concerned. This is a rarity when it comes to a tax saving fund since most if not all, function more or less like a multi cap. Some could even function like a large & mid cap fund in certain cases.

There are several reasons for fund managers being more adventurous as mentioned below:

  1. There is no restriction with regards to SEBI rules on mandates unlike most other categories of equity mutual funds.
  2. Here’s an interesting fact, to qualify as an equity mutual fund, most schemes need a minimum of 65% investment into equities whereas elss mutual funds need a minimum of 80%.
  3. The fund comes with a lock in period of 3 years so therefore even if the fund performance dips in the near term, the fund manager is assured a stable aum since redemptions are blocked.
  4. This stability in aum allows the fund manager to go for longer bets unlike other equity mutual fund schemes where in, even short-term returns sways the behaviour of investors.
  5. He has the opportunity to invest in more cyclical businesses as opposed to open ended schemes since he has the time to direct and redirect his portfolio towards the desired destination.

Axis long term equity mutual fund strategy
The current fund manager who has been managing the fund since April 2011 has historically had a bias for businesses which are leading their respective sectors or are thereabouts.

elss funds

He hold’s a similar pattern of investing in all the schemes managed by him, the table below explains this better.

Axis Long Term Equity Fund
Axis Focused 25 Fund

Except for one, all the rest of the top 5 sectors for both Axis Long Term Equity and Axis Focused 25 Fund are the same.

The fund due to its bias for large cap stocks has expectedly underperformed its peers during bull years and outperformed its peers during bear phases since its high allocation to large cap stocks allows for greater downside protection during a bear phase but at the same time, it is left behind during bull phases due to its almost non existent allocation to mid & small cap stocks as was seen during 2017.

The fund also unlike most other elss mutual funds has a rather focused fund strategy.

Axis Long Term Equity Fund vs other elss mutual funds
Axis tax saver has been one of the oldest elss funds and the largest in terms of AUM.

Now let’s compare it with other top elss mutual funds and try and understand the differences.

No of Stocks
Large cap %
Mid Cap %
Small Cap %
Axis Long Term Equity Fund
HDFC Tax Saver Fund
Tata Tax Saver Fund
DSP Tax Saver Fund
As on 31/03/2020

  1. Despite all other funds having more or less the same allocation to large cap stocks, Axis tax saving mutual fund has managed to outpace them all in terms of both returns as well as downside protection.
  2. This can also be seen in their sister large cap funds of all the above mentioned fund houses because the strategy applied in both the categories, for all the fund houses is more or less the same.
  3. Even though Tata Tax Saver Fund has almost the same number of scrips, it is more biased towards volatile sectors like energy and FMCG.
  4. This is a good time to point out that merely investing in a large cap fund or a fund with a large cap bias neither guarantees stable returns nor downside protection, you need to pick well.

Click Here to read our review of Reliance Tax Saver Fund.

Does AUM size matter?
There have been several debates around this and yet we are as much closer to finding a certain answer to this as we are further away.

This is where we stand though.

A large AUM size does matter under the following situations:

  1. The fund is more biased to mid & small cap stocks or in case of large cap stocks, they are cyclical businesses.
  2. A gradual increase in AUM is still manageable as it gives the fund manager time to accordingly strategize his future course of actions and allows a fund house to convert a mid cap fund to a multi cap fund and a multi cap fund to a large cap fund and so on.
  3. A case in point here is when Mirae Asset India Equity Fund (Multi Cap) was converted to a Large Cap Fund in 2019.
  4. Certain fund houses especially in the small cap space due to such issues thereby restrict lumpsum investments in their schemes and only re open them during opportune times. Like when SBI,DSP and Nippon small cap did so during the Covid-19 crisis of March 2020.
  5. The major issue with a large sized AUM in aggressive funds is liquidity.
  6. The issue with Axis elss fund and its AUM is not its size per se but rather the sudden flows it receives with no periodic pattern to be able to gradually allocate them.

Yes, one can always debate that so is the case with almost every other tax saving fund but that’s not exactly true here for the following reasons:

  1. AUM flow in most other tax saving elss schemes is usually between January to March of every financial year and understandably so but along with that period, Axis tax saver fund has historically received flow in patches throughout the year.
  2. This only makes the situation dicey when a focused approach is applied to even in cases where it is not required but rather is deliberately been chosen as a strategy.
  3. This sudden spike can often put the fund manager under scenarios where he would be needed to allocate large sums in a quick fashion irrespective of the market situation. Axis mutual fund schemes did apply cash strategy successfully during 2018 which resulted in improved performances.

Click Here to read our analysis of Axis Mutual Fund schemes.

Historically AUM in mutual fund schemes have either been at the back of short term performance, brand name or support of sister banking channels as a distribution partner. It does not take a Sherlock to unravel why the top most fund houses in terms of AUM size are backed by their sister banks as a distribution partner.

This is precisely why investors need to let go of the notion that mutual fund companies and mutual fund schemes with a higher AUM have historically performed well or are destined to perform well.

Click Here to read of two schemes that have done well even with a lower AUM.

A higher mutual fund scheme AUM does not guarantee future performance nor does it mean that the fund has high returns in the past and vice versa is the case for funds with lower AUM. Picking a fund and sticking with it for a long period needs various factors to be considered like the fund manager, category, strategy, mutual fund advisor, etc.

So do a prior analysis and have reasons for picking and sticking with a fund that is logical and not comical. This becomes all the more vital when you are picking a tax saving mutual fund because of the lock in period that comes attached.

For portfolio enquiriesemail us with your doubts at

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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