Thursday, May 28, 2015


One fund which has absolutely floored me with its amazingly consistent performance in all types of market, especially in the last 8 quarters or so is the EDELWEISS ABSOLUTE RETURN FUND. 
I have ensured that every single client of mine has got an exposure to this fund. 
And, in fact, whatever maybe the Risk Profile of an Investor, this Fund is a MUST HAVE. 

Why am I so sold on this fund?
Whats so special about this strange sounding Absolute Return fund. 

Lets analyse.............


Edelweiss Absolute Return Fund may "sound" like a liquid fund because of the "absolute" in its name.  But, its a Equity Fund and surprisingly its benchmark is Crisil MIP Blended Index Fund!.

Edelweiss Absolute Return Fund is an ideal fund for those investors who want stable returns with low volatility. 

It stated objective to capture 60% of Nifty upside and limit to just 20% of Nifty downside

The Primary Objective of the Edelweiss Absolute Return Fund is to generate Absolute Return over a longer period of time without the accompanying volatility usually associated with Equity Funds.
Its aims to achieve this by avoiding risk and by taking hedging and arbitrage positions, special situations, Nifty Short, and also FDs (yes, you read it is Fixed Deposits!)
Special Situations, according to Edelweiss people, mean IPOs, Delistings, Equity Buy Back, Open Offers, Mergers, Acquisitions, etc.   
Special Situations aims at providing good trades which yield absolute returns over short periods.  Its Special Situations has generated returns ranging from 3% to 25% Absolute Returns. The Fund also does not shy away from taking exposure to Money Market Instruments and IPOs too.
Its hedging strategy is mostly dependent upon the basis of Corporate actions rather than on Market Valuations and this has helped  the Fund in protecting the fall in NAV during market downsides.
Since the fund's strategies of Equity Investment for Long Term, Special Situation Investments and, Hedging strategies and Derivative trading are not co-related, the volatility of the Fund drastically comes down.


Scheme Name  (25-May-2015)
Returns*- Edelweiss Absolute Return Fund
1 Month
3 Month
6 Month
1 Year
2 Year
3 Year
5 Year
Since Inception
Edelweiss Absolute Return Fund(G)

Crisil MIP Blended Index ( ARF Scheme Benchmark)
Crisil Balanced Fund Index
CNX Nifty Index


The fund has managed to beat its Benchmark quite consistently by a good margin and that too while taking less risks!
The Edelweiss Absolute Return Fund has NOT given any negative returns if the investor has stayed for more than 2 years and upside is in line with Nifty!
The Fund has participated in its stated objective of capturing 60% market upside and limiting to 20% of Nifty Downside splendidly.

Period-wise performance
Rolling 12M till 30th April 2015
CAGR       (Frm '10)
Volatility (Frm '10)
Edelweiss ARF
Crisil MIP Blended Index (Benchmark)
Crisil Balanced Fund Index
Nifty Index

The Fact the Fund has been able to beat Nifty even during market upsides is clearly captured in the data shown alongside....whenever an investor has invested in Edelweiss Absolute Return Fund at the Lowest Level of Nifty, he has made more money in this Fund than Nifty.

A Low Volatility fund

Its most unique and most attractive part is that when the Nifty/Sensex falls, the Fund's fall is closed to MIPs inspite of being an Equity Fund.

Edelweiss Absolute Return Fund has been paying regular uninterrupted Quarterly dividend since the past 18 quarters. Its been paying about 2.2% which is eqvivalant to 8.8% Tax Free Dividend.
And it even paid 3% dividend in Jan 2015. 

1. This Fund is for those who want equity risk without the accompanying volatility.
2. The Fund is especially suitable for Investors who have a lumpsum in hand and  are unsure of where to invest and could look at this fund as short to medium term alternative. 
3. Good alternative to Fixed Deposits not only in terms of Returns but Taxation too. 
4. New Investor to Equities who want to get a feel of Equity flavor. 
5. An investor who is looking for consistent and stable return. 

Please treat this Fund as a MIP rather than a Equity or a Debt fund.
If your time horizon is more than 18 months but less than 5 years, you should look at this fund.

It is one of those rare funds which has given complete satisfaction to me and my clients both in Bull and Bear Periods.

Especially their Prepaid SIP concept is something which every AMC should look at replicating.
To understand how Prepaid SIP works, please click 

When a Fund not only protects you during downside but also participates in Upside, do you need to look at anything.
If a client comes to me and wants only one fund it will be EDELWEISS ABSOLUTE RETURN FUND.

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Tuesday, May 26, 2015


 Recently my article on Child Insurance was published in Bank Bazaar.

Sadly, due to space constraint, the Full Article was NOT published.
Hence I am reproducing the same here for the benefit of my readers.

Hello Friends,
The Birth of a Child brings lot of joy to parents.
After the initial euphoria settles down, the future expenses start staring at your face. Even if you don’t think on this, the innumerable ads on TV, newspaper, Bill Boards will not let you forget them.
They start emotionally attacking you
“Are you a Responsible Parent”?
“Have you planned for your Child’s Higher Education”?
“Have you planned for your Child’s Marriage”?

So, then, you are forced to start thinking of your Childs Future.
And, what do you see?

Of course, the umpteenth Child Plans splashed across. Whether you like it or not, you will be bombarded with the "specialties" of these plans and the Companies leave no stone unturned to make you feel that they are next only to God when it comes to protect your dear child's future.
They promise you that they will pay for your Child’s Higher Education, her Marriage, etc.
And, yes, these Ads spare no effort to instill fear in you “What will happen to your Child in case of your untimely death?”
This one line is enough for every parent to run to Insurance Agents to get a Child Plan.

Before diving into the sea of these Child Insurance Plans, you will do well to do some basic homework like
1. When will your child need the money?
2. How much will you need for the particular goal (Marriage, Education)?
3. How much you will be able to save?
4. How much Insurance Cover I need?
Besides the above, you will also have to consider various factors like whether you have any loan, you have your own house, are there any other bread winners in family, etc


There are basically 3 types of Child Insurance Plans namely
1. Money Back :
This is by far the most POPULAR plans. Under this plan, your child will get Survival Benefits at regular intervals.
For ex :
AT your Child's 18 years of age, she would get about 20% of Sum Assured, and a further 20% at age of 20 and so on.
This Plan is useful for those who feel the need for Lumpsum requirement at regular intervals and helps you in Life Stage Planning. 
Another good benefit, is these plans offer Premium Waiver Benefit which ensures that in case of death of Parent, then the Premiums are waived off and the Policy continues with benefits.  (Please make sure, that this benefit is there in policy before taking one).

The BIGGEST disadvantage with these plans is the dismal returns often failing to match even Inflation returns.
Especially, if you are planning to buy Money Back Plans for your Child's Education, then this is definitely NOT advised. Education Inflation is at around 12% and this Money Back should be giving you less than 9%........leaving you grossly underprepared at the time of Goal.
Also, the Premiums are steep and are best avoided.
The Plan actually covers the Child and not the Parent! (How stupid). So, in case of untimely death of your Child, you will get the Sum Assured. I wonder which Parent would like to take this?? It is your Child who needs Financial Security and not you!
If the Child survives the Term, then you will get the entire Sum Assured along with Accrued Bonus, et al.

2. ULIPS :
ULIPs are Unit Linked Plans which are non-traditional plans wherein Returns are Market Dependent.
Under ULIPs, the Life Insured is the Parent. If, the Parent dies (or in some policies gets diagnosed by Critical Illness), then the Child would receive the Sum Assured in Lumpsum. Not only this, the Future Premiums are waived off (the Company pays the same) and on Maturity, the Child would get the Fund Value too!’
ULIPs plans offer variety of funds ranging from Conservative to Balanced to aggressive.
Under ULIPs, you can change from Debt to Equity and vice versa without the worry of Taxation, thus enabling you to benefit from both Timing the Market and also Rebalancing your Portfolio.

Sadly, the charges are too high in ULIPs. These ULIPs levy a variety of charges on your Child Plan by way of Premium Allocation Charges, Policy Administration Charges, Mortality Charges, Fund Management Charges, etc.
This would affect the returns generated by investment in Market Related Instruments and ultimately the Corpus that your child receives.
 Another negative against ULIPs is in case of Emergency and you want to surrender or do partial withdrawal, the charges are high and also attract Tax.

While a really long Term ULIP (above 15 years) could actually cost less than a Mutual Fund, the flexibility is a huge issue. You just can’t move from one ULIP to another ULIP as in case of Mutual Funds.
Putting money in Child ULIP plans is akin to putting all your eggs in One Basket!
If the ULIP underperforms on a consistent basis, you are stuck!

Endowment Policies are one where lumpsum amount is paid at the time of the Maturity along with bonuses.
This type of Policy is very useful to plan for your Child’s BIG expenses like Wedding, Higher Education, etc
And, unlike ULIPs, there is a minimum guaranteed amount of payment. Besides, you may get Bonuses too. Endowment Policies too invest in Market backed securities, but unlike ULIPs, they invest only in Debt products and the returns too are not exactly spectacular.

There are two major drawbacks with Endowments Plans
  1. The Returns are pathetic, with less than double digits, and come nowhere even near Inflation, forget about the Education Inflation which is in High Double Digits.
  2. The Insurance Cover too is almost always very little. (If you require higher cover, you will obviously pay a steeper premium).
If you do want to take up an Endowment Policy, treat it as a Debt Portion of your overall Asset Allocation.

Almost all Child Insurance Plans cover the Parent and thus, if in an event of an unfortunate untimely death of the Parent, the Child’s needs would still be taken care of by way of Lumpsum payment on death and also on Maturity.

Child Plans are just Attractive Packages with nothing inside.
Yes, on an untimely death of Parent, some policies offer Waiver of Premium and the Policy continues but this benefit comes at a high cost as the Premium increases due to this Rider. And, Mortality Rate Charges for a Child Plan are quite high too.

Insurance should be taken only for covering your Life and should never be taken as a part of Investment. Never.
So, if the Child Insurance Plans are not matching your needs, what is the Alternative??

The Alternative, my friend, is the COMBINATION OF TERM PLAN AND MUTUAL FUNDS:
Term Plans are the BEST way to cover your life as they are very affordable. And Mutual Funds ensure that you get Market Returns without the painful payment of High Charges which you may have to bear in case of ULIPs.

So, in nutshell, my dear investor, please remember that just investing in CHILD EDUCATION PLAN does not guarantee you to get the Money you require for your Child’s education.
You need to invest in the Right Asset Class after taking Protection through Life Insurance Cover.
If you are still a fan of Insurance combo than, you are suggested to take a ULIP, especially if the goal is at least 15 years away.  But, do remember, that ULIPs may leave in the false hope of adequate coverage as the Premiums will be steep as the Cover goes up. They leave you Under Insured.

Endowment and Money Back are a strict NO-NO. Investing in an Insurance Plan which gives less than 10% when the Inflation is growing at 10% is definitely not a wise thing to do.
My Final Take is that there is nothing to beat the Combination of Term Insurance Plan with Diversified Mutual Funds.
And, yes, along with this also invest in other products like Sukanya Samruddhi, PPF, etc
So, dear friends, selecting the right plan for your child is  NO CHILD’S PLAY
Please take the advice of a Competent Financial Advisor. 

Best of luck,
Srikanth Matrubai

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