ULIP review: How well do Tata AIA Life’s equity funds fare against peers

Our study showed that the Whole Life Mid Cap Equity Fund and Large Cap Equity Fund have done well against benchmark as well as ULIP fund peers across various point to point time-periods

Kumar Shankar Roy Jun 8, 2020

ulipTata AIA Life is a joint venture between Tata Sons and AIA Group. One of the fastest growing companies in the life insurance sector, Tata AIA Life is among the top 10 based on individual weighted new business premium. We reviewed Tata AIA Life’s ULIP equity funds as part of our coverage of the performance of ULIP funds. Our performance analysis is focussed on three largest funds. Apart from looking at the short, medium and long-term returns of the Tata AIA Life funds, we will be comparing them with benchmarks, similar products of peers like ICICI Prudential Life, HDFC Life, SBI Life, Bajaj Allianz and some of the comparable mutual funds that run themes. Read on to know more.

ULIP funds

The life insurance company manages over Rs 7,300 crore across 15 funds. We at RupeeIQ will look at the three largest funds: a midcap fund, a large & midcap fund and a largecap fund . The chief investment officer of the whole team (including debt, hybrid) is Harshad Patil. The pure equity funds are managed by either fund manager Rajeev Tiwari or Nitin Bansal.

1. Whole Life Mid Cap Equity Fund

This is a high risk fund. The primary investment objective of the fund is to generate long term capital appreciation from a portfolio that is invested predominantly in mid cap equity. The Whole Life Mid Cap Equity Fund manages over Rs 4,100 crore worth money. The fund can invest a minimum of 60% in equities (and maximum of 100%), while a maximum of 40% can be in cash/money market instruments.

Tata AIA Life Whole Life Mid Cap Equity Fund follows a blend investment style, which is a mid-point between value investing and growth investing. At the end of May 2020, about 93% of money in the fund was in equities. The rest was in sovereign-rated money market instruments.

The fund has over 50 stocks in its current portfolio. Since this is a midcap oriented fund, the fund has small weights. Its top 5 stock weights are Divi’s Lab (2.91%), ICICI Lombard General Insurance (2.6%), Torrent Pharma (2.3%), Indraprastha Gas (2.28%) and IPCA Labs (2.25%).

From a sector distribution perspective, Tata AIA Life Whole Life Mid Cap Equity Fund is most exposed to pharma (13.12%), chemicals (11.56%), financials except insurance (10.85%), electrical equipment (7.22%), food products (4.95%) etc.

In the last 1 year period, the fund has fallen 11.87% which is much better than Nifty Midcap 100 index (down 26.09%) and peers like SBI Life Midcap Fund (down 12.24%), HDFC Life Opportunities Fund (down 19.77%) and Bajaj Allianz Life Accelerator Mid-Cap Fund II (down 19.92%).

In the last 3 year period, Tata AIA Life Whole Life Mid Cap Equity Fund is down 0.96% CAGR compared to Nifty Midcap 100 index’s 8.82% CAGR decline and peers like Bajaj Allianz Life Accelerator Mid-Cap Fund II (down 4.03% CAGR) and HDFC Life Opportunities Fund (down 4.49% CAGR). However, SBI Life Midcap Fund (down only 0.01% CAGR) has out-performed in this time period of 3 years.

In the 5 year period, which marks the time when ULIP investors can withdraw money from an ULIP, Tata AIA Life Whole Life Mid Cap Equity Fund is up 5.08% CAGR, outperforming Nifty Midcap 100 index’s 0.14% CAGR and peers like Bajaj Allianz Life Accelerator Mid-Cap Fund II (up 4.24% CAGR) and HDFC Life Opportunities Fund (up 3.26% CAGR).

Here is a return snapshot:

ULIP fund name 1 yr % 3 yr % 5 yr %
Tata AIA Life Whole Life Mid Cap Equity Fund -11.87 -0.96 5.08
SBI Life Midcap Fund -12.24 -0.01 N.A.
HDFC Life Opportunities Fund -19.77 -4.49 3.26
Bajaj Allianz Life Accelerator Mid-Cap Fund II -19.92 -4.03 4.24
Nifty Midcap 100 (index) -26.09 -8.82 0.14
More than 1 year returns are expressed in Compound Annual Growth Rate (CAGR)

2. Equity Fund

The primary investment objective of the Tata AIA Life Equity Fund is to generate long term capital appreciation from a portfolio that is invested predominantly in equity and equity linked securities. This is the second biggest fund and manages investor money worth Rs 1,078.22 crore. The fund is benchmarked to the BSE Sensex. The investment style of the fund largecap & midcap blended.

At the end of May 2020, Tata AIA Life Equity Fund was invested over 96% in equities. The fund is allowed to hold 100% in equity and upto 20% in money market instruments etc.

The fund appears to take moderate to large stock weights. Its top 5 holdings are Reliance Industries (8.89%), HDFC Bank (7.94%), ICICI Bank (6.84%), Infosys Technologies (6.32%) and Nippon India ETF Bank BeES (6.28%).

From a sectoral perspective, financials are its biggest bet (28.48%), followed by IT (11.21%), oil related (10.63%), chemicals (8.83%) and food products (4.37%).

In terms of returns, in the last 1 year Tata AIA Life Equity Fund is down 17.9%, which is better than the Sensex’s 18.36% drop. While ULIP funds in largecap & midcap category are not available, the mutual fund category has quite a few funds in the Rs 1,000 crore size range. The 1 year return range for MF products is between 15-22%. Of course, Axis Growth Opportunities (a relatively new scheme) is an outlier with less than 3% decline in the one year period ended May 29, 2020.

In the 3 year period, Tata AIA Life Equity Fund return is flattish at 0.27% CAGR, under-performing the Sensex (1.35% CAGR). Though the ULIP fund has failed to beat the Sensex, it appears well placed vis-a-vis similar sized MF largecap & midcap funds are down 1-5% in the same period.

In the 5-year time period, Tata AIA Life Equity Fund is up 2.91% CAGR which is again under-performance compared to the Sensex’s 3.1% CAGR gain. Similar sized MF peers are down between 1-5% in this period, underscoring the under-performance by the ULIP fund in this phase.

Here is a return snapshot:

Fund name 1 yr % 3 yr % 5 yr %
Tata AIA Life Equity Fund (ULIP) -17.9 0.27 2.91
Tata Large & Midcap (MF) -14.05 -0.05 3.47
HDFC Growth Opportunities (MF) -22.78 -5.2 -0.38
Sundaram Large & Midcap (MF) -19.49 -0.63 4.54
Sensex (index) -18.36 1.35 3.1
More than 1 year returns are expressed in Compound Annual Growth Rate (CAGR)

3. Large Cap Equity Fund

The Rs 966-crore Tata AIA Life Large Cap Equity Fund is ULIP scheme which appears to follow blended largecap stock investing. The fund can take stock bets from 80% to 100% while debt, money market instruments etc. has 0% to 20% room. The ULIP fund is benchmarked to the Nifty 50, a largecap index. Largecaps are supposed to be less volatile than others like midcap and smallcap.

At the end of May 2020, Tata AIA Life Large Cap Equity Fund was nearly 96% invested in equities. Its top stock holdings include Reliance Industries (8.50%), HDFC Bank (7.24%), Infosys Technologies (7.07%), ICICI Bank (5.81%), Bharti Airtel (4.84%), Maruti Suzuki India (4.63%), Hindustan Unilever (3.58%), abd Tata Consultancy Services (3.57%).

Much like the Tata AIA Life Equity Fund, Tata AIA Life Large Cap Equity Fund’s top sectoral bets include financials (24.83%), IT (11.47%), oil related (8.58%), pharmaceuticals (6.58%) and automobile related (5.45%).

In terms of 1 year return, the ULIP fund is down 14.85%, out-performing the Nifty 50’s 19.65% decline. Except HDFC Life Large Cap Fund (down 13.98%), all the peer largecap ULIP schemes have under-performed the Tata AIA Life Large Cap Equity Fund. ICICI Prudential Bluechip Fund is down 20.82%, SBI Life Equity Fund is down 17.05%, and Bajaj Allianz Life Equity Growth Fund is down 16.9%.

In the 3-year period, Tata AIA Life is the best among peers studied. The ULIP fund has generated a 3-year CAGR of 1.8%, which although small looks better when you look at Nifty 50’s -0.14% CAGR in the same 3 years ended May 2020. In peers, ICICI Prudential Bluechip Fund is down 2.32% CAGR, Bajaj Allianz Life Equity Growth Fund is marginally down 0.2% CAGR, SBI Life Equity Fund is marginally down 0.63% CAGR, and HDFC Life Large Cap Fund is flattish at -0.03% CAGR.

In the longer term 5-year period, Tata AIA Life Large Cap Equity Fund is (again) the best among peers and has also delivered some alpha compared to Nifty 50. The Tata AIA Life Large Cap Equity Fund is up 3.86% CAGR compared to Nifty 50’s 2.58%, and peers — Bajaj Allianz Life Equity Growth Fund
(up 3.09% CAGR), SBI Life Equity Fund (up 2.91% CAGR), HDFC Life Large Cap Fund (up 2.8% CAGR) and ICICI Prudential Bluechip Fund (up 1.55% CAGR).

Here is a return snapshot:

ULIP fund name 1 yr % 3 yr % 5 yr %
Tata AIA Life Large Cap Equity Fund -14.85 1.8 3.86
ICICI Prudential Bluechip Fund -20.82 -2.32 1.55
Bajaj Allianz Life Equity Growth Fund -16.9 -0.2 3.09
SBI Life Equity Fund -17.05 -0.63 2.91
HDFC Life Large Cap Fund -13.98 -0.03 2.8
Nifty 50 (index) -19.65 -0.14 2.58
More than 1 year returns are expressed in Compound Annual Growth Rate (CAGR)

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 kumarsroy@rupeeiq.com.

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