We review Max Life’s ULIP equity funds as part of our coverage of the performance of ULIP funds.

Our analysis is focussed on three funds viz. Max Life UL Life Growth Super Fund, Max Life High Growth Fund, and Max Life UL Pension Growth Super Fund. This is because the funds are pure equity in terms of mandate. Since risk parameters are not mentioned in the publicly available fund factsheets of Max Life, we will be solely looking at returns of the funds and then comparing them with similar products of peers like ICICI Prudential Life, HDFC Life, SBI Life, Bajaj Allianz, and Tata AIA Life. Read on to know more.

Max Life UL Life Growth Super Fund

This an open ended equity fund with focus on largecaps. It is arguably one of the biggest equity funds in Max Life ULIP funds stable, with over Rs 5,100 crore in assets under management (AUM). As on November end of 2019, about 96% of the fund money was in equities. Max Life UL Life Growth Super Fund is benchmarked against the Nifty 50 index. Do notice that the benchmarking is against the price return variant of the index. This effectively means that ULIP funds that compare themselves to Nifty 50, and not Nifty 50 Total Return Index (TRI), get a 1.3-1.5% return advantage over 1 to 5 year time periods.

The Max Life UL Life Growth Super Fund is primarily equity-oriented by ensuring at least 70% of the fund corpus is invested in equities at all times. The remaining is invested in debt instruments across Government, corporate and money market papers. However, as we have seen currently, equity allocation can be a lot higher. The fund’s current top portfolio holdings are Reliance Industries (RIL), Infosys, HDFC, ICICI Bank, HDFC Bank, L&T, etc. in that order.

Coming to the 1-year return, this largecap ULIP equity fund has generated a 10.13% gain. This is under-performance compared to Nifty 50 return. Compared to peers, Max Life UL Life Growth Super Fund has done better than ICICI Pru Life Bluechip Fund, HDFC Life Large Cap Fund and Bajaj Allianz Life Equity Growth Fund, but fares worse than SBI Life Equity Fund and Tata AIA Large Cap Equity Fund. Top-performing largecap mutual funds have generated between 14% to 17% in the 1-year period.

In the 3-year period, Max Life UL Life Growth Super Fund has given 13.88% CAGR, which edges out Nifty 50 return. Incredibly, Max Life UL Life Growth Super Fund is among the best in the 3-year period when compared to peers. Only, Tata AIA Large Cap Equity Fund has done better with its 14.1% CAGR (compounded annual growth rate). Top-performing largecap mutual funds have generated between 16% to 19% in the 3-year period.

In the crucial 5-year period, Max Life UL Life Growth Super Fund has generated 8.33% CAGR compared to Nifty 50’s 7.02% CAGR. However, it must be noted that the return clocked by Max Life UL Life Growth Super Fund is lower than Bajaj Allianz Life Equity Growth Fund II and Tata AIA Large Cap Equity Fund. The Max Life ULIP fund, however, has done better than ICICI Pru Life Bluechip Fund, HDFC Life Large Cap Fund, SBI Life Equity Fund, SBI Life Equity Pension Fund and Bajaj Allianz Life Equity Growth Fund. Top-performing largecap mutual funds have generated between 9% to 11% in the 5-year period.

Do note that Max Life UL Pension Growth Super Fund, a smaller fund with nearly Rs 300 crore AUM, has a similar profile and holdings to Max Life UL Life Growth Super Fund. Take a look at how both the funds have done compared to Nifty 50 as well as peer funds.

Additional Read: SBI Life ULIP funds review: A mixed bag in terms of benchmark outperformance

Max Life High Growth Fund

Max Life High Growth Fund has an AUM of over Rs 300 crore and is an open ended equity multicap fund with focus on midcaps. Due to the midcap bias, we have compared the fund with midcap ULIP equity funds.

The fund, at the end of November 2019, has about 90% equities allocation, way ahead of the mandated minimum of 70% of the fund corpus to be invested in equities at all times. The remaining is invested in debt instruments. Its latest top holdings include PI Industries, Voltas, Cholamandalam Investment, CONCOR, Alkem, Federal Bank, Sundaram Finance and Narayana Hrudalaya.

Let us now take a look at the 1 year, 3 year and 5-year returns.

Coming to the 1-year return, Max Life High Growth Fund has 8.08% gain versus its benchmark’s 1.61% loss. Though the fund is midcap biased, we believe it was able to generate returns due to tactical largecap allocations. Remember midcaps have not done well in this period. Compared to peers, Max Life High Growth Fund has done better than HDFC Life Opportunities Fund or Bajaj Allianz Life Accelerator Mid-Cap Fund II. However, Tata AIA Whole Life Midcap Equity Fund and SBI Life Midcap Fund have clocked better returns. Top-performing midcap mutual funds have generated between 8% to 14% in the 1-year period.

In the 3-year period, Max Life High Growth Fund has given 11.17% CAGR, which is far higher than the benchmark appreciation. In fact, the ULIP fund’s return is the highest among all peers viz. HDFC Life Opportunities Fund, SBI Life Midcap Fund, Bajaj Allianz Life Accelerator Mid-Cap Fund II and Tata AIA Whole Life Midcap Equity Fund. Top-performing midcap mutual funds have generated between 9% to 16% CAGR in the 3-year period.

In the 5-year period, Max Life High Growth Fund has clocked 8.59% CAGR, which looks great compared to its benchmark. However, this is the weakest show compared to ULIP fund peers. Tata AIA Whole Life Midcap Equity Fund (11.37%), Bajaj Allianz Life Accelerator Mid-Cap Fund II (9.94%) and HDFC Life Opportunities Fund (9.38%) have out-performed Max Life High Growth Fund in this tenure. Top-performing midcap mutual funds have generated between 9% to 11% in the 5-year period.

Take a look below at the graphical representation of returns across various periods. The benchmark numbers for Max Life High Growth Fund look particularly depressed vis-a-vis peers. Do note that these return numbers have been sourced from Max Life fund factsheets here.

Additional Read: Bajaj Allianz Life ULIP funds: Most of actively managed equity schemes beat benchmark in 5-year period

RupeeIQ take

Largecaps have done better than midcaps in the last 12-15 months, barring small periods. Naturally, the returns of Max Life largecap ULIP equity funds look better than its midcap fund in the 1 year and 3 year period. The returns, however, seem to converge in the 5 year period. The 5 year period is very important because 5 years is the mandatory lock-in period for ULIPs and there is no way to withdraw money before this time.

Max Life largecap and midcap ULIP equity funds look reasonably placed against peer funds. We are particularly impressed by how the midcap fund has managed to shield against the excessive volatility in midcaps. However, it must be said that top-performing mutual funds continue to beat ULIP funds in their categories.

Additional Reading

ULIP Funds Review: Most HDFC Life equity schemes beat benchmark returns

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 instrument including ULIP equity funds mentioned in this article.

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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