Over Half of ELSS Mutual Funds Lag Benchmarks in 3 Years
An alarming 56% of the very many equity-linked savings schemes, referred to as ELSS or tax-saving mutual funds have in a measure of three years, failed to outshine their benchmarks. Of the 36 active ELSS funds, 20 were lagging their respective benchmarks, leaving only 16 ahead.
Some of the poor performers in the ELSS are the big names in this category i.e. Aditya Birla SL ELSS Tax Saver Fund, which has returned 13.67% against the benchmark return of 20%; another one is Axis ELSS Tax Saver Fund, which could return only 10.80% against 20% returns of its benchmark. Then there are Canara Rob ELSS Tax Saver and HSBC Tax Saver Equity Fund, which have underperformed the benchmarks and could return only 17.06% and 19.31%, respectively.
Most notably, Axis ELSS Tax Saver Fund, the largest fund in the category with assets under management worth Rs.38,278, managed only a three-year return of 10.80%, significantly behind its benchmark return of 20%.
However, some of the ELSS funds managed to outperform their benchmark handily. For instance, the SBI Long Term Equity Fund, which is the oldest within the category, clocked an impressive 28.93% return over the last year against a relatively strong 19.99% rise in its benchmark. Similarly, HDFC ELSS Tax Saver and Quant ELSS Tax Saver Fund offered returns of 25.95% and 27.56%, respectively, outpacing their benchmark.
The three-year return of the ELSS fund category, in aggregate, stands at 19.7%, which is a shade below the benchmarks they are pitted against, like NIFTY 500 TRI or even BSE 500 TRI, which turned around 20% over the same period.
ELSS, or tax-saver mutual funds, are regarded as one of the best options available for saving tax under Section 80C of the Income Tax Act. One attractive feature they offer to an investor is the deduction of up to Rs.1.5 lakh from their taxable income in a financial year. There is a three-year lock-in period and the potential for very high returns over a longer time frame, although a large number of funds in this category have underperformed in recent years.
