HDFC Long Term Advantage Fund

HDFC Long Term Advantage Fund is an ELSS (Equity linked savings scheme) which qualifies for deduction under section 80C as per the Income Tax India Act, 1961. The fund has a lock-in of 3 years and aims to provide optimal capital appreciation over the tenure. The fund invests in equity related instruments and hence, qualifies as equity mutual fund. The fund has a mandate to invest anywhere between 85% - 100% in equity and equity related instruments. The fund was launched in the year 2001 and has had a decent run in terms of returns over the many years. It manages close to Rs. 1500 crore in assets.

Investment objective of HDFC Long Term Advantage Fund

The scheme provides tax benefit under section 80C of Income Tax India Act, 1961 and therefore has a lock-in period of 3 years. It is aimed at providing capital appreciation by investing predominantly in equity and equity related instruments.

Type of fund and its key features

The fund is an open-ended equity fund and hence, the investor can invest in the fund right through the year. Since the fund offers tax benefit, there is a lock-in period of 3 years. The fund invests in equity and equity related instruments and has only minimal exposure to debt and debt related instruments. The fund is ideal for planning short-term financial goals such as vacation, buying vehicle etc.

Current portfolio construction and analysis

The current portfolio construction (as of 31 January 2019) of the fund is as below –

It is evident that the fund has a larger market cap to manage as compared to its peers. The exposure to giant cap stocks is significantly high as compared to its peers. The fund seems to have de-risked its portfolio by gaining exposure in low risk stocks. The peers have a higher exposure in midcap stocks which indicates that HDFC Long Term Advantage Fund is a better option from the risk perspective.

The fund’s investment style can be identified as Growth style with a bias towards large cap stocks.

Top 25 holding for HDFC Long Term Advantage Fund (as of 30 January 2019)

The portfolio has well-known names in the industry. The fund has a well-diversified portfolio of 34 stocks. The exposure towards the top 10 stocks is 60% with top5 stocks accounting for 38.68%. The top 3 sector holding for the fund is 54%. The top 3 sectors held in the portfolio of HDFC Long Term Advantage Fund are Financial, Energy and Construction.

An investor should consider investing in the fund only after evaluating the fund performance over periods of 1 year, 3 year and 5 years. For ELSS funds, it would suffice to look at 3-year returns. The fund performance does not provide any assurance of the type of returns that will be generated in the future. However, it is an indicator of whether the fund has managed to outperform the benchmark and peers.

The fund has managed to post higher returns when the market has posted positive returns, however, during a downturn in the market the fund has fallen much more than the index. This is indicative of the fact that there is a need for the fund to de-risk its portfolio further to ensure that it continues to outperform during a downturn as well.

The fund is suitable for an investor who is looking for an avenue to park funds to gain tax benefit under section 80C. The fund can be preferred over its peers primarily due to its performance track record. The mutual fund house is known for its ability to outperform within its category and respective benchmark. Investment in this fund could be aligned with any financial goal which is likely to need funding over 3 years.