Though mutual funds have emerged as a popular retail oriented investment tool, ULIPs are the original ‘prodigal son’ and have undergone multiple changes over the years to become more investor-friendly
ULIPs or Unit Linked Insurance Plans are a type of insurance product that combines the benefits of protection and saving in a single plan. As a result, one’s money can grow, and at the same time loved one’s future is protected from life’s unexpected turns. There are three types of ULIPs – equity, debt, and hybrid (allocation). How have ULIPs performed in 2020 so far? Which ULIPs did better than others? In this article, we will try to answer your questions by using Morningstar data on equity ULIP returns. Read on.
Morningstar website shows 5 main equity ULIP categories. We will be touching upon a universe of 205 largecap, midcap, multicap and equity – others strategies since they are most relevant for retail/individual investors. The data is for up to November 2, 2020.
Below is the snapshot data on categories in the form of a table. Do note that ULIP return data collection is not as smooth and sophisticated as for mutual funds, and strict categories do not exist much in the ULIP world since the rules are more relaxed.
The category performers
Largecap – In these 153 ULIPs, the main focus is on the stocks of the biggest companies. The top 3 winners in year to date in largecap ULIP space are PNB Met Life – Virtue Fund II with 14.05% gain, Tata AIA Life – Tata AIA Top 200 with 9.24% gain and Bajaj Allianz Life – Pure Stock Pension Fund with 8.78% gain.
To put this in context, the top year to date performers in largecap mutual fund space have delivered about 4% return (JM Large Cap Fund and Canara Robeco Bluechip Equity Fund). Largecap equity mutual funds have to invest a minimum of 80% of assets in only largecap stocks.
Do note the worst-performing ULIPs are still down over 30% in around 10 months, which is quite high compared to largecap mutual fund duds that have tanked 12-14% only.
Midcap – In these 17 ULIP strategies, the focus is on midcaps but do bear in mind that ULIPs do not run 100% midcap funds. Unlike the mutual fund categorization, there is no hard and fast rule for ULIPs to invest a minimum 65% of total assets in equity and its related securities of midcap firms. Typically, midcap ULIP funds are large & midcap funds by nature, with a few exceptions of course.
The top 3 winners in YTD race for midcap ULIP funds are Tata AIA Life – Whole Life Mid-Cap Equity Fund up 6.79%, PNB Met Life-Mid Cap Fund up 6.66%, and Edelweiss Tokio Life Equity Midcap Fund up 5.47%. These ULIP returns pale in front of top midcap mutual funds like PGIM India Midcap Opportunities (up 23%), Quant Midcap Fund (up 15%) or Baroda Mid-cap Fund Plan A (up nearly 12%).
The bottom ULIP midcap strategies have fallen by 5% or more in the YTD period, similar to MF midcap peers.
Multicap – There has been a lot of changes, and they are still happening, in how mutual fund categorize multicap equity funds. No such confusion in ULIP multicap space which has 26 funds. In the YTD period, the top ULIP strategies in this category are Shriram Life – Tyaseer up 11.59%, Bajaj Allianz Life – Pure Stock Fund up 10.38% and Tata AIA Life Multi Cap Fund up 9.1%. In fact, multicap ULIPs have the highest YTD category average in the tracked equity ULIP universe.
In comparison, the YTD winners in the multicap equity mutual fund category have given 16-20% (Quant Active Fund, Para Parikh Long Term Equity Fund).
The bottom performers in the multicap ULIP space have lost 10% year to date, lower than multicap mutual funds that have lost 12-15%.
Equity (Others) – This is a broad category that contains ULIP strategies with various themes like energy, infrastructure, etc. In this space, the top performers have shown 2-4% gain year to date: Aviva Life – Life Unit Linked Infrastructure Fund up 3.73% and Aviva Life – Pension Unit Linked Infrastructure Fund up 2.13%. ULIP energy funds are down 10-11% YTD.
In comparison, mutual fund equity thematic funds especially in the pharma, IT/technology have done much better with double-digit percentage gains. Top performers in terms of infrastructure oriented mutual funds have given 8-9% YTD gains (Quant Infrastructure Fund, BOI AXA Manufacturing & Infrastructure). Energy oriented mutual funds are split down the middle with the worst ones losing 14% while the best have given 9% gain.
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