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Mint
13-06-2025
- Business
- Mint
Why that fund of funds may turn out to be costlier than you think
Investors in fund-of-funds (FoF) schemes often do not get a clear picture of what they're really paying. In the absence of a standardized mechanism to report expense ratios, fund houses have their own approach to the calculation. Most FoF schemes report only the expense ratio of the 'wrapper", which is the cost of running the FoF. However, FoFs have other funds as their underlying, which in turn charge an expense ratio. The true expense ratio of an FoF is the wrapper cost plus the weighted expense of the underlying schemes they invest in. Take, for example, the SBI Gold Fund (Direct). Popular mutual fund comparison site Value Research lists its total expense ratio (TER) as 0.1%, the lowest for the gold FoF category. However, the underlying gold ETF that this fund feeds into has an expense ratio of 0.73%, pushing the actual cost to 0.83%, and making it the third most expensive option among 17 gold FoFs. On the same site, DSP MF's Gold FoF shows a TER of 0.65%, which seems to be the highest. However, it adds the cost of the underlying fund that it feeds into while calculating the ratio, making it the cheapest. The data, fetched on 30 April 2025, shows SBI Gold FoF manages ₹3,921 crores, and DSP Gold FoF ₹85 crores. 'Direct investors mostly look at expense ratios while choosing FoFs like gold and silver, as there is no active management involved, and the cost becomes a deciding factor. Lack of standardized reporting mechanism of TER in such funds can be particularly confusing for DIY (do it yourself) investors," said Alekh Yadav, director at Sanctum Wealth Management. Also Read: How are different fund of funds taxed? Grey zone The Securities and Exchange Board of India (Sebi) mandates that the scheme information documents (SID) and advertisements for FoFs must disclose the expenses of the underlying scheme apart from the wrapper cost. However, Sebi does not mandate disclosing the exact expenses of the underlying schemes in periodic factsheets and only mentions that disclosure be given that the underlying scheme expenses are applicable. According to chapter 5.8.1.3 of Sebi's master circular, FoFs need to disclose the underlying scheme's TER in the scheme information documents/key information memorandum (KIM). Experts say common investors hardly know that such documents exist, let alone read them. There is no mention of making it mandatory on the Amfi website and the factsheet, which is commonly used by retail investors. Most AMCs, including HDFC AMC and Kotak AMC, give a disclaimer but do not disclose the TER of the underlying schemes in their factsheet for gold ETF FoF. Fund houses like ICICI Pru disclose the underlying schemes' total expense in the factsheet along with the wrapper cost. 'Current regulations do not require disclosure of the expense ratio of underlying funds in the factsheets, though it is mandatory to disclose it in scheme documents like SID / KIM or KID," said Devang Chawda, senior product manager at DSP Asset Managers. 'In the spirit of full transparency, we voluntarily disclose the total expense ratio, including that of underlying funds, across all investor communications to reflect total cost borne by the investor." Even when the SID discloses the TER of the underlying schemes, it can be hard for retail investors to decode it. SID shows expenses charged by each underlying scheme, and if the FoF has multiple underlying schemes, the investor needs to tally the total expense by doing a weighted average calculation of all schemes. FoF category, like an asset allocator, can have multiple underlying schemes. According to the AMFI website, total TER (including underlying) in respect of FoF investing liquid schemes, index funds & ETFs has been capped at 1%. That of FoF investing in equity-oriented schemes has been capped at 2.25%, and FoFs investing in other schemes than those mentioned above have been capped at 2%. Queries sent to Sebi on Wednesday did not elicit any response, while SBI MF declined to comment on the matter. Also Read: Fund houses suggest these four tweaks to make mutual funds even more sahi How to fix this Currently, most mutual fund comparison platforms show only one TER—usually the wrapper cost—because that's what AMCs report. This leaves investors unaware of the scheme's true cost. Manuj Jain, co-founder of ValueMetrics, said the market regulator should standardise reporting of FoF expense ratios and, in the spirit of full transparency, it can push AMCs to mandate disclosure of the total expense ratio of FoF schemes, as that is the true expense that an investor incurs. Such a rule would also empower third-party comparison sites to fetch and display accurate, complete expense data, helping investors make better-informed decisions. Also Read: Should you diversify your portfolio by adding mutual funds focused on quality strategy?
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Business Standard
11-06-2025
- Business
- Business Standard
Savings a/c returns drop post RBI rate cut: Where to park your idle ₹1 lakh
If you're like many with money lying idle in your savings account, now is the time to rethink where you keep your funds. After last week's RBI repo rate cut, banks have started trimming down their savings account interest rates—and that directly impacts what your money earns. HDFC Bank, for instance, has slashed its interest on balances above Rs 50 lakh from 3.25% to just 2.75%. And that's just the beginning—more banks are expected to follow suit. So if your Rs 1 lakh is sitting idle, it's likely earning less than inflation, effectively losing value over time. But here's the good news: You can earn better returns without locking up your money or taking high risks. How? Through liquid mutual funds. Why liquid funds make sense right now: 1. Higher Returns Than Savings Accounts While savings accounts now offer meagre returns of 2.7% to 3.5%, liquid funds have recently delivered 6.5% to 7.4% annualised returns. That's more than double in many cases. Liquid funds invest in short-term debt instruments like treasury bills and commercial paper, making them ideal for short-term parking of funds without sacrificing returns. 2. Easy Access to Your Money Need your money urgently? No problem. Liquid funds offer same-day or next-day withdrawals with no exit load after 7 days. Even if you withdraw within a few days, the penalty is negligible—making them nearly as liquid as a savings account, but much smarter. 3. Minimal Risk Liquid funds are not risk-free, but they're considered one of the safest mutual fund categories. Example: Let's say you leave ₹1 lakh in a typical savings account earning around 3% interest annually. After one year, you'd have about ₹1,03,000—just ₹3,000 more. Now, compare that to putting the same amount in a liquid fund that yields an average of 6.8%. At the end of the year, your money would grow to around ₹1,06,800. That's a difference of ₹3,800—for doing almost nothing differently, except choosing a smarter place to park your money. Over time, this gap only widens, especially if you regularly park idle funds in a savings account instead of exploring better options like liquid funds. "With interest rates dropping, your savings account will be earning you less than before. Liquid funds, on the other hand, offer easy access, minimal risk and higher returns. If you just need a place to park cash for the short term, liquid funds are the ideal place," said Harshita Singh of Value Research. Moreover, Liquid funds almost never go down in value, even over short periods like a week or a month. For instance, data analysed by Value Research shows that a typical liquid fund, such as Kotak Liquid Fund, shows consistently positive one-week (99.78 per cent of the time in the last decade) and one-month (100 per cent of the time in the last decade) rolling returns. On the other hand, a short-duration fund, such as Kotak Bond Short Term Fund, can experience brief dips in value, as seen in occasional negative one-week (15.8 per cent of the time in the last decade) or one-month (7% of the time in the last decade) rolling returns due to interest rate movements or credit events. This stability ensures that the money earmarked for withdrawals is protected from market volatility, giving you peace of mind. When not to choose a liquid fund: You need your money within a day or two and don't want to worry about fund settlement timings. You're unwilling to open a mutual fund account (which is fairly simple these days). You're expecting fixed, guaranteed returns (liquid fund returns are market-linked, though relatively stable).
Economic Times
06-06-2025
- Business
- Economic Times
MF Tracker: Will this Rs 30,000 crore smallcap fund continue to maintain its long-term performance?
Launched in September 2009, the SBI Small Cap Fund is given a three-star rating by Value Research and is unrated by Morningstar. SBI Small Cap Fund emerged as the best-performing equity mutual fund based on daily rolling returns, delivering a CAGR of 21.87% over the past seven years. This performance stands out among approximately 171 equity mutual funds during the same timeframe. Launched in September 2009, the fund is given a three-star rating by Value Research and is unrated by Morningstar. Based on daily rolling returns, the fund has offered 20.68% CAGR in the last five years and in the last three years, it gave a CAGR of 26.13% based on daily rolling returns. Also Read | Nippon India Taiwan Equity Fund tops return chart with 22% in May. Can the momentum sustain? Based on the trailing returns, the fund has underperformed or performed at par with the category average. In the three months, the fund gave a 15.23% return against 18.64% as the category average. In the last six months, the fund lost 6.95% against a loss of 6.49% by the smallcap category. In the last one year, three years, and five years, the fund has underperformed against its category average in the similar period. Over the past year, the fund delivered a return of 7.43%, lagging the category average of 14.96%. Over three years, it posted an 18.87% CAGR versus the category's 23.38%. Across five years, the fund returned a CAGR of 29.31%, falling short of the 34.23% category average. Note, the returns of benchmark BSE 250 Small Cap - TRI were not available in the ACE MF, so ETMutualFunds could not compare the performance of the fund with the benchmark. According to an expert, since its inception, SBI Small Cap Fund has consistently outperformed its benchmark, delivering a 21.87% CAGR over seven years based on daily rolling returns, an impressive feat in the small-cap space. 'What sets the fund apart is its consistency across market cycles, including periods of high volatility like the 2020 pandemic crash and the 2018 mid-cap/small-cap correction. Even during these downturns, the fund demonstrated lower drawdowns compared to peers, suggesting superior risk-adjusted returns,' Shruti Jain, Chief Strategy Officer, Arihant Capital Markets, shared with adds that the fund follows a bottom-up stock-picking approach, with a focus on companies having scalable business models, clean governance, and healthy balance sheets. Over the last 10 calendar years (2015–2024), the smallcap fund posted negative returns only once—in 2018—when it declined 19.62%. Its best performance came in 2017, delivering a stellar return of 78.66%, the highest in the decade.'The fund has consistently showcased strong downside protection compared to both its benchmark and peers. During the 2018 small-cap correction, while the Nifty Small Cap 100 index dropped by 44.4%, SBI Small Cap Fund limited its decline to just 28.1%, outperforming the category average fall of 29.4%,' Jain further commented.'Again, in the 2020 COVID-19 market crash, the fund's downside capture ratio stood at an impressive 43.6, meaning it lost less than half as much as the broader market. In recent corrections, the funds have been almost at par with its peer and benchmarks. These figures highlight the fund's resilience and effective risk management, even during some of the most volatile market phases,' she added. Also Read | 9 equity mutual funds offer over 20% CAGR in seven years. Are there any included in your portfolio? If an investor invested Rs 10,000 at the time of the inception of the fund, the current value of the investment would have been Rs 1.23 crore with an XIRR of 21.37%. In the last five years, the value of the same monthly investment would have been Rs 9.53 lakh with an XIRR of 19.14%.In the last three years, the value of the same SIP investment would have been Rs 4.44 lakh now with an XIRR of 14.93%If an investor made a lumpsum investment of Rs 1 lakh at the time of the inception of the fund, the current value would have been Rs 16.91 lakh now with a CAGR of 19.67%. In the last five years, the value of the same lumpsum investment would have been Rs 3.58 lakh with a CAGR of 29.08%. In the last three years, the value of this investment would have been Rs 1.68 lakh now, with a CAGR of 18.90%.The smallcap fund had 79.73% in equity, 0.17% in debt, and 20.10% in others as on April 30, 2025. In comparison to the small cap category, the scheme is overweight on others, whereas underweight on equity and debt. The category on average had 91.20% in equity, 0.29% in debt, and 8.51% in others. Being a smallcap fund, the scheme invests 76.96% in small caps, 1.77% in mid caps, and 21.27% in the allocation of the small cap fund, Jain said that SBI Small Cap Fund has demonstrated effective downside risk management by maintaining a well-diversified portfolio, avoiding excessive concentration, and adopting a bottom-up stock selection approach and the fund manager tends to focus on companies with strong balance sheets, quality management, and scalable business models traits that help weather economic slowdowns. The PE and PBV ratios of the midcap fund were recorded at 40.75 times and 6.26 times, respectively, whereas the dividend yield ratio was recorded at 0.59 times as of April fund had the highest allocation in the finance sector of around 7.94% compared to 7.53% in the category. The scheme is overweight on capital goods, chemicals, FMCG, hospitality, Agri, Infrastructure, and consumer durables.'Many of the portfolio's companies are under-researched or emerging players, which offers the potential for high alpha generation. The fund typically holds around 45–55 stocks, ensuring diversification without dilution of returns,' Jain told ETMutualFunds. Also Read | Planning to save Rs 10,000 monthly? Here is how much you will generate in 25 years The top 10 stocks of the fund constitute 24.66% of the total portfolio as of April 2025. Based on the last three years, the scheme has offered a Treynor ratio of 1.65 and an alpha of 0.01. The sortino ratio of the scheme was recorded at 0.54. The return due to net selectivity was recorded at (0.06), and the return due to improper diversification was recorded at 0.07 in the last three expert adds that the fund's Sharpe Ratio has consistently been higher than the category average, reinforcing its strength in managing both growth and downside risks. The investment style of the fund is to invest in growth-oriented stocks in smallcap market capitalisationApart from the SBI Small Cap Fund, there are 22 other funds in the category which have a track record of three years in the market. Among the total 23 funds in the category, Bandhan Small Cap Fund offered the highest return of 32.09% in the last three years. ITI Small Cap Fund offered the second-highest return of 29.40% in the same period. PGIM India Small Cap Fund gave the lowest return in the last three years of around 15.45%. Post the performance of the small cap fund in the last three years, Jain said that the Nifty SmallCap 250 index is running at a PE ratio of about 32.4 which is higher than the 5 years average PE range, indicating that valuations are stretched which suggests that investors should be cautious in the short term, as high valuations may limit near-term upside and increase vulnerability during market corrections. For conservative investors, Jain advises that they may choose to stay away from small-cap funds given their high volatility and current elevated valuations, and instead, they can focus on large-cap funds, which are available at attractive valuations and offer more stability in uncertain markets. On the other hand, for aggressive investors, she adds that those with a high-risk appetite and long-term horizon can consider adding small-cap funds with a proven track record to their portfolios. 'A staggered investment approach through SIPs is advisable to manage market fluctuations and reduce timing risks. While near-term caution is warranted, small-cap funds continue to offer strong long-term growth potential in India's expanding economy,' she should always choose a scheme based on risk appetite, investment horizon, and goals. (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times) If you have any mutual fund queries, message on ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on ETMFqueries@ alongwith your age, risk profile, and Twitter handle.
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Business Standard
22-05-2025
- Business
- Business Standard
SCSS vs NSC vs Debt Funds: Which fixed-income option is the best in 2025?
When it comes to generating stable, tax-efficient returns, investors in India often find themselves torn between traditional savings instruments like the Senior Citizens' Savings Scheme (SCSS) and the National Savings Certificate (NSC), or newer, more market-linked options like debt mutual funds. With interest rates, tax rules, and inflation all evolving, how do these options compare today? More importantly, which one should you pick based on your needs? The Contenders: What are they? Fixed-rate small saving schemes vs debt mutual funds. Source: Value Research 1. SCSS (Senior Citizens' Savings Scheme) For: Individuals aged 60 and above Interest Rate (April–June 2025): 8.2% p.a. (paid quarterly) Tenure: 5 years (extendable by 3 years) Tax Benefits: Eligible for Section 80C deduction (up to Rs 1.5 lakh) Interest is taxable, but TDS is applicable if interest exceeds Rs 50,000/year Best for: Retirees seeking regular income with government guarantee 2. NSC (National Savings Certificate) For: Any Indian citizen Interest Rate (April–June 2025): 7.7% p.a. (compounded annually, paid at maturity) Tenure: 5 years Tax Benefits: Principal qualifies for Section 80C Interest is taxable, but reinvested interest (except final year) also qualifies for Section 80C Best for: Conservative investors with a 5-year horizon, who don't need regular income 3. Debt Mutual Funds For: Investors of all ages Returns: 6–8% on average, can be higher/lower depending on type Taxation (Post-2023 rules): Gains taxed at slab rate (no LTCG benefit) No Section 80C benefit Indexation benefit abolished for debt funds Best for: Investors seeking liquidity and diversification, with some risk tolerance Comparative Snapshot Which one should you choose? For Senior Citizens: Value Research recommends SCSS Why: It offers high assured returns and quarterly payouts, ideal for retirees needing regular income. Example: Mrs. Rani, 65, invests Rs 15 lakh in SCSS. She earns Rs 30,750 every quarter, providing her with predictable income while her capital remains safe. For Salaried Taxpayers Saving for 5 Years: Choose: NSC Why: If you want a fixed return and tax savings under 80C but don't need liquidity, NSC fits the bill. Example: Sanjay, 35, wants a tax-saving investment but already maxes out EPF and PPF. He invests ₹1.5 lakh in NSC. In 5 years, he gets back ₹2.2 lakh, earning steady compounded returns without taking any market risk. For Working Professionals with Moderate Risk Appetite: Choose: Debt Mutual Funds Why: If you value liquidity and want to diversify with dynamic returns, debt funds (like low duration, short-term, or corporate bond funds) are suitable. Example: Priya, 40, keeps ₹5 lakh in a corporate bond fund yielding 7.2%. She holds it for 2 years and exits without penalty when she needs the money for her child's school admission. Caution: Tax rules have changed Post-April 2023, debt funds lost their long-term capital gains (LTCG) tax benefit and indexation advantage. Now, all gains — even after 3 years — are taxed as per slab rate. This reduces their edge over traditional instruments, especially for those in the highest tax bracket (30%). Tip: Tax-aware investors in higher brackets should lean toward SCSS or NSC unless they need liquidity. There's no one-size-fits-all answer. Your life stage, income needs, tax bracket, and risk appetite should drive the decision. As per Value Research:
Time of India
22-05-2025
- Business
- Time of India
MF Tracker: Can this mega largecap fund add stability to your portfolio in volatile market?
Live Events Fund manager comment on performance Experts take on performance With the market being volatile and experts are recommending large cap funds for investment of which one fund is ICICI Prudential Bluechip Fund . The fund is the largest fund in the category and had an AUM of Rs 68,033 crore as on April 30, on May 23, 2008, the large cap fund is given five star rating by ValueResearch and on trailing returns, the scheme has outperformed its benchmark and category average in the last six months, nine months, one-,three-,five years. On the other hand, it has outperformed against its benchmark and underperformed the category average in the last three large cap fund offered 0.66% return in the last nine months against a loss of 1.61% by the benchmark (NIFTY 100 - TRI) and a loss of 2.02% as the category average. In the last one year, it offered 10.38% against 8.51% by the benchmark and 8.04% as the category the last three years, the scheme gave 20.74% compared to 16.53% by the benchmark and 17.25% as the category average. The scheme in the last five years offered 26.07% against 23.56% by the benchmark and 22.40% as the category the basis of daily rolling return in the last five years, the scheme has offered 14.55% return and based on the same parameter, in the last three years, the scheme gave 19.47% return.'The success of ICICI Prudential Bluechip Fund can be attributed to the disciplined approach we follow in portfolio construction. Our primary focus is on avoiding significant mistakes—specifically, steering clear of stocks that could land in the bottom third of the performance curve,' commented Anish Tawakley , Co-Chief Investment Officer – Equity, ICICI Prudential AMC'We adopt a barbell strategy for stock selection. On one end, we invest in value opportunities—companies that may be under near-term pressure but offer meaningful potential for mean reversion. On the other end, we back businesses with strong growth prospects and robust fundamentals. This balanced approach helps us build a resilient portfolio that can deliver consistent, long-term performance across market cycles,' he added,An expert believes that since its inception in 1993, ICICI Prudential Bluechip Fund has had a track record of strong performance and being an actively managed large-cap category fund, it has a higher expense ratio.'The fund has generally outpaced the benchmark, which is BSE 100 TRI. The 3-month returns have been slightly below par; however, such short-term aberrations are normal in actively managed funds. The fund demonstrates resilience and consistency over the long term, reflecting the manager's disciplined approach and stock picking skills,' said Rajesh Minocha, a Certified Financial Planner (CFP), Founder of Financial RadianceLooking at the yearly returns for the last 10 years, the scheme has offered negative returns in 2015 and 2018 of around 0.21% and 0.81% respectively. Across the 10 calendar years, the fund gave the highest returns in 2017 of around 32.75%.If an investor invested Rs 10,000 via monthly SIP in the scheme since its inception, the current value would have been Rs 89.25 lakh with an XIRR of 15.69%. In the last five years, the value of the same monthly SIP would have been Rs 9.66 lakh with an XIRR of 19.36%.In the last three years, the value of the same monthly SIP would have been Rs 4.73 lakh with an XIRR of 19.01%.If an investor made a lumpsum investment of Rs 1 lakh in the fund at the time of its inception, the current value would have been Rs 10.81 lakh with a CAGR of 15.03%. The value of the same investment in the last five years would have been Rs 3.16 lakh with a CAGR of 25.89%. In the last three years, the value of the same investment would have been Rs 1.76 lakh with a CAGR of 20.76%.The large cap fund had 90.66% in equity, 1.60% in debt, and 7.74% in others as on April 30, 2025. In comparison to the large cap category, the scheme is overweight on debt and others whereas underweight on equity. The category on an average had 94.10% in equity, 0.73% in debt, and 5.16% in a large cap fund, the scheme invests 84.33% in large caps, 5.86% in mid caps, 9.66% in others and 0.15% in small the allocation by the fund and being the large cap fund, Minocha advices that investors looking for active management in the large caps and who can endure some volatility, as compared to passive variants like a Nifty 50 index fund, can choose this fund and in today's market situation with high valuations across the board, there may be value in looking for more flexible options toward risk-adjusted adds that investors who have a horizon of five years or more may want to look at flexi-cap or large & mid-cap funds, where fund managers consider their allocation into different market caps depending on the valuation comfort. That being said, ICICI Pru Bluechip can still be considered for some exposure exclusive in the large-cap PE and PBV ratio of the small cap fund were recorded at 31.81 times and 5.96 times respectively whereas the dividend yield ratio was recorded at 4.89 times as of April fund had the highest allocation in the bank sector of around 24.07% compared to 26.45% by the category. The scheme is overweight on automobile & ancillaries, crude oil, infrastructure, construction materials, telecom, insurance, and top 10 stocks of the fund constitute 54.39% of the total portfolio as on April 2025. Based on the last three years, the scheme has offered a Treynor ratio of 1.44 and an alpha of 0.42. The sortino ratio of the scheme was recorded at 0.81. The return due to net selectivity was recorded at 0.41 and return due to improper diversification was recorded at 0.02 in the last three investment style of the fund is to invest in growth oriented stocks in large cap market from ICICI Prudential Bluechip Fund, there are 27 funds in the category who have a track record of three years. Nippon India Large Cap Fund gave the highest return of 22.90% in the last three years, followed by DSP Large Cap Fund which gave 21.54% return in the same Bluechip Fund gave the lowest return of around 13.83% in the last three years in the large cap at the performance of the large cap funds, Minocha mentioned that when markets are volatile, there is a tendency to lean towards safety in large caps and the bigger upside offered by mid and small caps during a rally, however, can be offset by the fact that large caps tend to offer better downside protection and quicker recoveries during market corrections.'Investors with the temperament for low volatility and predictable returns are best placed with a stake in large-cap funds, which have given returns over inflation over time. Hence, a balanced investment approach combining the relative safety of large caps with selective exposure to the mid/small-cap funds can prove to be a reward in terms of returns for taking on risk,' he should always choose a scheme based on risk appetite, investment horizon, and goals.: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)If you have any mutual fund queries, message on ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on ETMFqueries@ along with your age, risk profile, and Twitter handle.
