This fund has never failed to deliver superior returns in both good and bad markets. While at the moment Zurich India TaxSaver lags its peers, the long-term track record speaks volumes. For instance, its trailing 3-year and 5-year returns rank in the category's top quartile.
Apart from tax benefits and superior returns, this fund stands tall among its peers for stability. A standard deviation of 6.32 —lowest in the category—makes it the least volatile tax-planning fund. What makes it less risky vis-à-vis competitors is its well-diversified portfolio across time periods.
Following largely a buy-and-hold strategy, it is heavily tilted in favour of large-cap growth stocks. Infosys, HLL and ITC have been some of its prominent holdings. Even during the tech boom in 2000, it stuck to large-caps and posted category-beating returns.
But the fund's success hasn't been limited just to bull phases. It has managed to do well even during bear phases. When the tech rally was over, the fund reduced its technology holding from 35 per cent in February 2000 to 12 per cent in March 2000 by selling some of its picks like Mastek and Hughes Software. Also, it deployed the new money that kept pouring in into defensives like automobile and FMCG stocks. As a result, the fund successfully booked the best performer slot in the category for itself.
That apart, between May 2000 and July 2001, it also parked average 10 per cent of its assets into bonds, which provided the much-needed cushion. The fund's considerable exposure to defensives (average 28 per cent)—FMCG initially and later healthcare—helped it put in a decent show till the third quarter of 2001.
But what worked then didn't work post-9/11. In the first half of 2002, it took a big position in PSUs, but the delay in disinvestment affected its performance. Moreover, mid-caps were the key market drivers after February 2002 and the fund's low exposure to them dented its performance. It also increased its FMCG holdings, which continue to remain out of favour.
Overall, Zurich India TaxSaver's stable long-term performance more than compensates for its recent performance. This fund is a suitable core holding for investors seeking long-term growth coupled with tax benefits.