HDFC Life ULIPsContinuing our ULIP tracking initiatives we are taking a closer look at HDFC Life Insurance’s ULIP equity funds in this article (previously we covered ICICI Pru Life funds here). ULIPs, or Unit Linked Insurance Plans, have been pitted by insurance companies as an investment alternative to mutual funds. As an investment product, it is important to see whether ULIP funds that invest in equities/stocks are regularly beating their respective benchmarks. Investors must remember that index funds can deliver the same returns that a Sensex or Nifty 50 delivers. If investors are paying investment management fees to mutual funds or insurance funds, they must ensure that their money generates more than index-type returns.

At first glance, most of HDFC Life Insurance Company’s equity schemes have beaten the benchmark returns in 1 year, 3 year, 5 year and since-inception time periods ended September 30, 2019. This indicates that the investment team at HDFC Life is doing a reasonably good job. Read on to know more.

HDFC Life Insurance ULIP products

There are about 10 ULIP products that HDFC Life Insurance sells. One of them is the popular HDFC Life Click2Invest, an online unit linked plan.

The other ULIP plans that are often sold by HDFC Bank branch officials are HDFC SL YoungStar Super Premium, HDFC Life ProGrowth Plus, HDFC Life Pension Super Plus, and HDFC SL Crest.

Prasun Gajri is the chief investment officer of HDFC Life Insurance. He has been associated with HDFC Life since April 2009 and heads investments. HDFC Life has about Rs 1.3 lakh crore assets under management, out of which 37% is in equities.

Every investment management team has a thought process that guides their investing actions.

For HDFC Life Insurance, the aim is to ensure that the investment process is not swayed by short term market volatility.

The team strives to control risk exposures in the portfolios through the setting of internal limits on the amount of risk that each portfolio can assume. Deviations in risk positions are monitored regularly and are corrected quickly.

Importantly, the team believes that superior fund performance is measured as the out-performance of the fund returns over their respective benchmark index returns. This is important because investors must not look at fund returns in absolute terms. If a fund grows 15% in five years, one should ensure that the fund has beaten the benchmark while generating those 15% returns.

HDFC Life ULIP equity funds

If you look at the ULIP pure equity funds in the HDFC Life stable, you will come across 17-18 funds. We at RupeeIQ have looked at a handful of equity funds (refer to graphic below).

HDFC Life ULIP fund name 1 yr return % 3 yr return % 5 yr return % Since inception return %
Growth Fund – Life 5.83 9.9 9.35 14.38
Benchmark – BSE 100 3.95 9.32 7.64 12.24
Growth Fund – Pension 5.74 9.83 9.31 14.08
Benchmark – BSE 100 3.95 9.32 7.64 12.24
Equity Managed Fund – Life 6.17 9.7 9.56 11.71
Benchmark – BSE 100 3.95 9.32 7.64 10.73
Equity Managed Fund – Pension 6.17 9.66 9.6 11.59
Benchmark – BSE 100 3.95 9.32 7.64 10.73
Large Cap Fund 3.88 8.87 6.83 9.2
Benchmark – Nifty 50 4.98 10.04 7.58 8.98
Mid Cap Fund -3.53 2.72 9.46 13.61
Benchmark – BSE Mid Cap Index -4.46 2.32 8.16 8.38
BlueChip Fund 6.65 10.16 9.54 9.06
Benchmark – BSE 100 3.95 9.32 7.64 8.05
Opportunities Fund 0.01 5.23 10.01 10.85
Benchmark – Nifty Mid Cap 100 -6.58 1.31 7.02 7.91
Equity Plus Fund 5.06 10.22 7.55 7.95
Benchmark – Nifty 50 4.98 10.04 7.58 8.18
Capital Growth Fund 4.88 N.A. N.A. 11.31
Benchmark – BSE 100 3.95 8.99
Discovery Fund 7.81 N.A. N.A. 6.46
Benchmark – Nifty Mid Cap 100 -6.58 -18.13
Fund Performance of ULIP Funds (Individual Funds) as on Sep 30, 2019

Growth Fund – Life

One of the earliest ULIP equity schemes, Growth Fund – Life was launched in January 2004. The fund, managed by Priyank Singhal, has a reasonable size of Rs 2,400 crore.

The fund has comfortably beaten its benchmark BSE 100 across 1 year, 3 year, 5 year and since inception (about 15 years).

Across the various HDFC Life ULIP equity funds, the core largecap stock holdings almost always involve HDFC Bank, Reliance Industries, Infosys, ICICI Bank, Kotak Mahindra MF – Kotak Banking ETF – Dividend Payout Option, ITC, Tata Consultancy Services, Reliance ETF Bank BeES, Larsen & Toubro, Kotak Mahindra Bank, SBI-ETF Nifty Bank, Hindustan Unilever, Axis Bank, Asian Paints (India) and Maruti Suzuki India.

Growth Fund – Pension

This is also one of the early ULIP equity schemes with an over 15 year track record. The nearly Rs 1,100-crore fund, also managed by Singhal, has outperformed benchmark BSE 100 across 1 year, 3 year, 5 year and since-inception time periods.

This fund is very similar to Growth Fund – Life in terms of portfolio constituents.

Equity Managed Fund – Life

This fund launched in January 2006 is Rs 612 crore fund. Co-managed by Shailesh Dhamankar and Kailash Lalwani, Equity Managed Fund – Life has comfortably beaten its benchmark in 1 year, 5 year and since inception periods. In the 3-year period ended September 30, 2019, the amount of alpha is a marginal 38 basis points only. Do note the benchmark index of the fund has been changed to BSE 100 only from June 14, 2018.

The fund invests predominantly in equity and equity-related securities and balances it by shifting assets to the fixed income securities depending on the fund manager’s views. The minimum allocation to equity will be 60%, but at the moment the equity weight is 94%.

Equity Managed Fund – Pension

Launched in January 2006 just like Equity Managed Fund – Life, the Equity Managed Fund – Pension shares the fund managers. The fund has comfortably beaten its benchmark in 1 year, 5 year and since inception periods. In the 3 year period ended September 30, 2019, the amount of alpha is just 34 basis points. Equity allocation is around 94%.

Large Cap Fund

Launched in August 2008, the Large Cap Fund lives by its largecap name. However, the fund managed by Shailesh Dhamankar has under-performed Nifty 50 in recent years. The benchmark has beaten the fund in 1 year, 3 year and 5 year periods by 75-117 basis points. The fund has been able to beat Nifty 50 in the since-inception period, but that too by 22 basis points alone.

This fund does not have any exposure to ETFs of mutual funds.

Mid Cap Fund

Surprisingly, HDFC Life’s Mid Cap Fund for ULIPs has done well even in trying markets. Though it is still small in size, the Priyank Singhal-managed fund has outshone benchmark BSE Mid Cap Index across since inception, 5 years, 3 years, 2 years, and 1 year time periods. In the last 2 years or so, midcaps have been out of favour. Even in such difficult times, the fund has lost less than the benchmark, which indicates downside protection. The fund is almost fully invested in equities (97.56%).

Being a midcap fund, this scheme’s top holdings are in Bajaj Holdings & Investment, Divis Laboratories, Glaxo Smithkline Consumer, Voltas, Federal Bank, Berger Paints India, The Indian Hotels Company, Container Corporation of India, Crompton Greaves Consumer, Shriram Transport Finance Company, MRF, Cholamandalam Investment & Finance Company, Colgate Palmolive (India), P & G Hygiene & Health, ABB India and Indraprastha Gas.

Opportunities Fund

This fund pre-dominantly invests in mid cap stocks which are likely to be the blue chips of tomorrow. The fund invests in stocks that have a market capitalization equal to or lower than the market capitalization of the highest weighted stock in the NSE CNX Midcap Index. The fund also has room to invest up to 20% in money market instruments/cash. Its latest portfolio shows that Opportunities Fund is 88.38% invested in equities while 11.29% is in money market instruments. Nishit Dholakia manages this fund.

Launched in January 2010, the fund is over eight years old. With over Rs 15,000 crore assets, this is one of the biggest ULIP equity funds in the HDFC Life stable. The fund’s performance track record shows why it may have become so big. The fund has outperformed its benchmark Nifty MidCap 100 by large margins. In the last one year when the benchmark fell by over 6.5%, the fund actually lost nothing. In the 3 year and 5 year periods, the alpha is about 3-4% annualized.

The fund’s current top equity holdings include Mahindra & Mahindra Finacial Services, Voltas, Indraprastha Gas, The Ramco Cements, Federal Bank, City Union Bank, Torrent Pharmaceuticals, AU Small Finance Bank, The Indian Hotels Company, Alkem Laboratories, Sundaram Finance, Cholamandalam Investment & Finance Company, Kansai Nerolac Paints, Mphasis, Crompton Greaves Consumer, RBL Bank, Godrej Industries, Jubilant FoodWorks and Balkrishna Industries.

Additional Read: ULIP Funds Review: ICICI Prudential Life Equity Schemes Struggle To Match Up With Benchmark Returns

Disclaimer: Views expressed here in this article are for general information and reading purposes only. They do not constitute any guidelines or recommendations on any course of action to be followed by the reader. The views are not meant to serve as a professional guide/investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product including ULIP.

Author
Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. He can be contacted on kumarsroy@rupeeiq.com