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Case study on corporate investments in Hybrid-Equity Savings Funds

Case study on corporate investments in Hybrid-Equity Savings Funds
Background

Background

Corporate Clients Wanting To Invest

Corporate Clients Wanting To Invest

Investment Time Horizon Of 9-12 Months

Investment Time Horizon Of 9-12 Months

Looking To Improve
Their Yields

Looking To Improve
Their Yields

Case Characteristics

Case Characteristics

  • Our corporate clients were looking to make investments in the market.
  • Corporate entities usually invest their funds in debt funds depending on the time horizon.
  • They wished to increase their yield value with a shorter time horizon.
Fascinating Findings

Fascinating Findings

  • The Reserve Bank of India had reduced the interest rates in 2020 in response to the Covid-19 pandemic.
  • The yield on Liquid Funds, Ultra Short Funds, and Low Duration Funds were just between 4.5% to 5%.
  • Investing in such funds is recommended only when the time horizon is between 12 to 18 months.
Actionable Alternatives

Actionable Alternatives

  • We advised them to invest in Mirae Asset Equity Savings Funds and Axis Equity Saver Funds.
  • Such Hybrid-Equity Savings Funds invest 1/3rd each of their funds in Equity, Equity Hedging and Fixed Income Markets.
  • This, because some corporates, like our clients, have an investment time horizon of 9 to 12 months.

Remarkable Results

Yields Rose With The Markets

Yields Rose With The Markets

Every time the market went up, the yields were higher. And when the markets were down, the downside was limited compared to other investment products.

Comparatively Higher Returns

Comparatively Higher Returns

The returns on their investments ranged between 8% to 9%, compared to traditional fixed income investments, which yielded hardly 5%

Tax Exemption Benefits

Tax Exemption Benefits

The dividends paid by Equity Savings Funds are taxed as per the income tax rate of the investor. Plus, long term capital gains upto 1 lakh are exempt from taxation.

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