HDFC MIP – Long Term Plan: Invest :: Business Line

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Investors can buy the units of HDFC MIP – Long Term Plan (HDFC MIP), a debt-oriented fund with substantial equity exposure too, to prop up returns. The fund has a fairly good track record of delivering returns over the years and compensates its investors for higher risks by participating in equity market rallies while its debt portfolio does the job of giving assured returns and high safety.

Over one-, three- and five-year periods, HDFC MIP has outperformed its benchmark — Crisil MIP Blended — by a margin of 1-3 percentage points. It has also handsomely beaten the category average over the years.

In the last five years, the fund has delivered compounded annual returns of 9.1 per cent, which places it in the top quartile of schemes in this category. It has done better than peers such as DSPBR MIP and Birla Sun Life MIP.

As with all monthly income plans, investors must note that there is no assurance of a periodic payout and it is subject to available surpluses and market conditions as well.

With a substantial equity exposure, HDFC MIP sports a slightly higher risk profile than any all-debt income fund. The fund may thus be suitable for investors with an appetite to stomach moderate volatility. Given its long-term track record of over nine years in delivering returns consistently, the fund may be suitable for the core portion of the debt portfolio too.

Investors can take the systematic investment plan (SIP) route for investing in the fund to ride out volatility and average costs.

Investments can be considered for the long-term of 5-7 years to benefit from bond rallies across market cycles, with equity giving returns a greater impetus.

PORTFOLIO AND STRATEGY

HDFC MIP invests 22-25 per cent of its portfolio in equity and generally sticks to large-cap stocks and bluechips.

In all the market rallies of the past few years, the fund has managed to outperform benchmark and most peers as its equity portion aided in bolstering returns.

Its debt portion mostly consists of fairly safe bets. Investment in government securities is quite high and has generally accounted for more than 12-13 per cent of the overall portfolio. Bonds, debentures and non-convertible debentures are the other avenues where the fund mostly invests.

These include highly-rated (AAA) instruments of financial institutions and companies such as PFC, HDFC, Shriram Transport, Sundaram Finance, REC and IRFC, among others.

The yield to maturity of the recent portfolio, at 9.1 per cent, is a fairly attractive return level. Over the past few years, HDFC MIP has constantly increased the maturity period of its debt portfolio and has been managed actively to get reasonably high yields.