Kotak Mahindra Life Insurance is a 100% subsidiary of Kotak Mahindra Bank. While its product suite leverages the combined prowess of protection and long-term savings, in this article we will do a review of Kotak ULIP fund strategies. Having covered leading insurance companies’ ULIP equity funds as part of our coverage of the performance of ULIP funds, it is important that Kotak investors get a better understanding of how the investments fare against benchmarks, similar products of HDFC Life, ICICI Prudential Life, SBI Life, Bajaj Allianz, etc. Read on to know more.

ULIP funds overview

There are five fund strategies that can be grouped into the predominantly equity basket. Remember that in Sept 2010, ULIPs saw a major transformation. Kotak Classic Opportunities Fund and Kotak Frontline Equity Fund are available with insurance plans launched for the era that started from Sept-2010. In the pre Sep-2010 era, there are Kotak Opportunities Fund, Kotak Pension Opportunities Fund and Kotak Pension Frontline Equity Fund. All the five funds exist very much till this day.

Our study focusses on Kotak Classic Opportunities Fund and Kotak Frontline Equity Fund; both are flagship products and offered to investors as the first investment options across various unit linked insurance schemes like Kotak Invest Maxima, Kotak Platinum, Kotak Ace Investment, Kotak Wealth Insurance, Kotak Single Invest Advantage and Kotak Headstart Child Assure.

The equity portion in funds is managed by Rohit Agarwal.

Before we start, allow us to remind you that Unit-Linked Insurance Plans (ULIPs) do not offer any exit/liquidity in the first five years. This is unique in the sense that your money is locked in a market-oriented investment, but you can’t take it out. Some close-ended mutual funds also similar terms, while tax-saving MFs (ELSS) offer a 3-year lock in.

1. Kotak Classic Opportunities Fund

Nature – This fund strategy aims to maximise the opportunity for long-term capital growth. The fund is mandated to hold a significant portion of investments in a diversified and flexible mix of large/medium-sized company equities. Essentially, this fund has a largecap bias, but it could also take a large & midcap nature.

Details – The fund has over 10-year history since its inception was on 16th December 2009. Naturally, the fund has grown in size and today has about Rs 5,341 crore in assets. The benchmark is BSE 200, and so we will compare its returns with BSE 200.

Holdings, sectors – The top stock holdings of Kotak Classic Opportunities Fund are Reliance Industries (8.84%), Infosys (7.36%), HDFC Bank (5.50%), Tata Consultancy Services (4.43%), SBI ETF Nifty Bank (3.92%), ICICI Bank (3.92%), Kotak Banking ETF – Dividend Payout Option (3.11%), Hindustan Unilever (2.85%), Larsen and Toubro (2.43%), Bharti Airtel (2.39%), ITC (2.17%), Dr Reddys Laboratories (2.13%), Britannia Industries (2.00%), etc. At a sector allocation level, the fund’s biggest exposures are in Financials, IT, Energy, Chemicals, Food products.

Against benchmark – We looked at 1 year, 2 year, 3 year, 4 year and 5 year return of the fund and compared it with its BSE 200 benchmark. With 95% assets of the fund in equity, as on September 30, 2020, the fund has underperformed in 3 of 5 periods i.e. 1 year, 3 year and 4 year comparisons. In 2 year and 5 year comparison, the fund has beaten its benchmark fair and square.

Against peers – Due to its largecap bias, returns of Kotak Classic Opportunities Fund can be compared with Max Life UL Life Growth Super Fund, ICICI Prudential Bluechip Fund, HDFC Life – Growth Fund (Life), SBI Life Equity Fund and Bajaj Allianz Equity Growth Fund.

In the 1 year period, the Kotak fund is ranked 3rd out of 6. In the 2 year period, the Kotak fund is ranked 2nd out of 6. In 3 year period, the Kotak fund is ranked 5th out of 6. In 4 year period, the Kotak fund is ranked 3rd out of 4 (data available for 4 funds only). In 5 year period, the Kotak fund is ranked 4th out of 6.

Compared to largecap category average of insurance funds, Kotak Classic Opportunities Fund has done better in 1 year, 2 year, 4 year and 5 year time periods. This is quite good.

2. Kotak Frontline Equity Fund

Nature – This fund strategy aims for a high level of capital growth, by holding a significant portion in large-sized company equities. This is a clear largecap fund. If Kotak Classic Opportunities Fund has room to become large & midcap, Kotak Frontline Equity Fund is more true-to-label in terms of largecap classification.

Details – The fund has over 10-year history, since its inception was on 17th December 2009. The fund is smaller in comparison to Classic. It has about Rs 800 crore in assets. The benchmark is BSE 100, and so we will compare its returns with BSE 100.

Holdings, sectors – The top stock holdings as well as portfolio weights of Kotak Frontline Equity Fund are quite similar to Kotak Classic Opportunities Fund. The top exposures are Reliance Industries (8.87%), Infosys (7.74%), HDFC Bank (5.45%), Tata Consultancy Services (5.06%), ICICI Bank (4.67%), SBI ETF Nifty Bank (4.11%), HDFC (2.66%) etc. At a sector allocation level, the fund’s biggest exposures are in Financials, IT, Energy, Chemicals, Autos.

Against benchmark – We looked at 1 year, 2 year, 3 year, 4 year and 5 year return of the fund and compared it with its BSE 100 benchmark. With 97% assets of the fund in equity, as on September 30, 2020, the fund has outperformed in 4 of 5 periods i.e. 1 year, 2 year, 3 year and 5 year comparisons. In only 4 year comparison, the fund has failed to beat its benchmark.

Against peers – We will compare returns of Kotak Frontline Equity Fund to the peers we used for Kotak Classic fund.

In the 1 year period, the Kotak Frontline Equity Fund is ranked 3rd out of 6. In the 2 year period, the Kotak fund is ranked 2nd out of 6. In 3 year period, the Kotak fund is ranked 4th out of 6. In 4 year period, the Kotak fund is ranked 2nd out of 4 (data available for 4 funds only). In 5 year period, the Kotak fund is ranked 4th out of 6. As is evident, Kotak Frontline Equity is slightly better than Kotak Class Opportunities.

Compared to largecap category average of insurance funds, Kotak Classic Opportunities Fund has done better in all the 5 periods i.e. 1 year, 2 year, 3 year, 4 year and 5 year time periods. This is better than Kotak Classic Opportunities.

Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. Kumar is a financial journalist, with a functional experience of 15 years. He tracks mutual funds, insurance, pension, PMS, fixed income/debt and alternative investments markets closely. He has worked for The Times of India, The Hindu Business Line, Deccan Chronicle Group, DNA, and Value Research, among others, across different cities in India. He is deeply interested in marrying data insights with actionable opinion. He can be contacted at [email protected].

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