Mid-cap funds offered by unit-linked insurance plans (ULIPs) have shown good returns over the long run; their performance has been similar to their mutual fund counterparts.
Here, we look at the performance of the top four mid-cap equity funds offered by ULIPs. Currently, ULIPs, put together, have 16 mid-cap funds.
Mid-cap funds invest mainly in mid-sized companies and are suitable for investors with a high appetite for risk.
In mutual funds, mid-cap funds are mandated to invest at least 65 per cent in companies that are ranked between 101 and 250 in terms of full market capitalisation. In ULIPs, the mid-cap funds, however, follow their own market capitalisation classification. During uncertainties, many funds have been seen increasing allocation to large-cap stocks, while some have upped their cash holdings up to 35 per cent. They follow Nifty Midcap 100 and Nifty Midcap 50 as benchmark.
Over the past year, stocks in the mid- and small-cap universe have corrected significantly. While the Nifty 50 tumbled 5 per cent, Nifty Midcap 100 index plummeted about 20 per cent. Mid-caps under the ULIP and mutual fund categories declined 18 and 15 per cent, respectively. But near-term gyrations should not be a deterrent. Over a longer period, these funds are wealth builders and can help you beat inflation.
Investors can switch or invest a portion of the premium in the below-mentioned funds. These funds are shortlisted based on the rolling returns calculated from the last seven-year NAV history (Source: Capitaline database).
Tata AIA Whole Life Midcap Equity Fund
Under Tata AIA’s ULIP, its whole life mid-cap equity fund is a good option. Launched in January 2007, Tata AIA Whole Life Midcap Equity Fund has been one of the top performing ULIP funds under the mid-cap category. It delivered 5, 12 and 18 per cent compound annual growth rate (CAGR) during three, five and seven years respectively, while the ULIP mid-cap category posted 4, 9 and 14 per cent returns. The Nifty Midcap 100 index delivered 2, 8 and 13 per cent returns, while the mutual fund mid-cap category delivered 4, 9 and 15 per cent returns during the periods.
A well-diversified portfolio with a blend of growth and value stocks has helped the fund deliver above-average returns. In the bear phases of 2011, 2013 and 2018, it contained the downsides well and delivered higher returns than the benchmark and the category. The performance during bull runs has been noteworthy. The top three sectors are finance, chemicals and pharma.
Birla Sun Life Multiplier
Birla Sun Life Multiplier delivered 5, 11 and 15 per cent CAGR during three, five and seven years respectively. The fund’s performance has been notable, especially in the bull market cycles. In the 2014 and 2017 bull markets, it clocked 64 and 51 per cent annualised returns, while the category delivered 61 and 43 per cent returns respectively. The fund managed to match the category returns in the bear phases too.
The fund selects stocks whose market capitalisation is ₹1,000 crore and above, while having the option to allocate up to 30 per cent of the assets to large-caps. Its prompt moves to increase cash and debt positions to reduce risks, have helped the fund deliver above-average returns.
Bajaj Allianz Accelerator Mid-Cap Fund II
The fund has delivered a CAGR of 12 per cent return since its launch in January 2010. Over the last, three, five and seven years, the fund generated a CAGR of 6, 9 and 14 per cent returns. Its benchmark Nifty Midcap 50 delivered 4, 6 and 11 per cent returns during the period.
Prudent cash calls have helped the fund contain the downsides well. For instance, in the 2011 and 2018 bear markets, the fund declined 25 and 10 per cent respectively, while the category registered negative returns of 29 and 12 per cent respectively.
The fund focuses on growth at a reasonable price (GARP) stocks with good corporate governance. As per the latest portfolio, the exposure to mid- and large-cap stocks was 68 and 32 respectively.
HDFC Standard Life - Opportunities Fund
This fund manages the highest corpus of ₹14,034 crore (as on July 2019) among the ULIP mid-cap category. It delivered 4, 10 and 13 per cent CAGR during three, five and seven years respectively, while Nifty Midcap 100 index delivered 2, 8 and 13 per cent returns during the periods.
The fund managed to deliver outperforming returns, especially in choppy markets. For instance, in 2015 and 2018, it posted 7 per cent and -9 per cent respectively, while the category posted 6 and -11 per cent.
It cherry picks stocks with market capitalisation equal to or lower than the market capitalisation of the highest weighted stock in the NSE CNX Midcap Index. M&M Financial Services, Voltas and Indraprastha Gas are the top stocks in the portfolio.