A new category of products called Equity Saving Schemes — which invest not only in equity and debt but also in arbitrage opportunities — is finding favour with MF houses. These funds are becoming popular because they are not only tax-efficient but are also less volatile than pure equity diversified funds.
A few months ago, Reliance Asset Management Company (AMC) and SBI AMC came out with their equity saving schemes. In the past few weeks, fund houses such as Axis AMC and TATA AMC have launched similar products.
Sundaram AMC and IIFL AMC have filed offer documents with the Securities and Exchange Board of India to launch equity saving schemes.
These funds will have equity exposure in the range of 65-90%, which includes equity and equity related instruments and arbitrage opportunities.
The remaining 10-35% will be invested in debt segments, which can include long- as well as medium-term papers.
Industry players say, even in arbitrage, the fund would invest in stocks as well as index futures to generate returns.
Dinesh Kumar Khara, MD & CEO, SBI AMC, said: “The SBI Equity Savings Fund offers investors a blend of equity, arbitrage and debt in a single fund. Investors can get the growth potential of equity, income opportunity from the fixed-income portion and tax-efficiency in its returns. The fund is suited for investors looking for tax-efficient returns with lower volatility than regular equity-based funds.”
Marketing officer of a top fund house said: “These funds are best suited for investors who wants less volatility in the portfolio and monthly payments. Investors who are looking at investment horizon of 1-3 years should invest in such schemes ,which can give them returns better than short-term debt funds.”
However, some players caution that these funds would give high returns only if there are good arbitrage opportunities. When arbitrage opportunities are low, such funds could lag.