Best ELSS Mutual Funds: HDFC ELSS Tax Saver Fund vs Quant ELSS Tax Saver Fund
February 19, 2024 Mutual Fund
Tax season is here, and with the FY 2023-24 assessment approaching, it’s time to explore smart tax-saving options. In the ever-evolving landscape of tax-saving investments, Equity Linked Savings Schemes (ELSS) occupy a prime position.
Offering market-linked returns coupled with tax benefits, these funds attract investors seeking long-term wealth creation alongside the unique benefit of a tax deduction of up to Rs 1.5 lakh under Section 80C.
Choosing the right ELSS (Equity Linked Savings Scheme) fund can be perplexing, especially from the plethora of options available from various fund houses. Two popular contenders, HDFC ELSS Tax Saver Fund and Quant ELSS Tax Saver Fund, have consistently garnered investor’s attention.
Both funds boast impressive track records, promising tax benefits, and cater to long-term wealth creation. But which one aligns best with your investment goals and risk appetite?
[Read: How to Select the Best Suitable Tax-saving Option for You]
Let’s dive into this in-depth comparison as we dissect their investment strategies, performance metrics, and suitability factors, empowering you to pick the champion for your portfolio.
This article elucidates a comprehensive evaluation of two prominent ELSS offerings, HDFC ELSS Tax Saver Fund and Quant ELSS Tax Saver Fund, to aid you in making an informed investment decision.
HDFC ELSS Tax Saver Fund is an open-ended equity scheme that belongs to HDFC Mutual Fund. It is a well-established tax-saving mutual fund scheme launched in March 31, 1996, and currently has an AUM of Rs 13,440.72 crore (as of Jan 31, 2024).
The scheme is a popular choice among investors seeking tax benefits and the potential for long-term capital appreciation. It aims to generate capital appreciation/income from a well-diversified portfolio comprising predominantly of equity & equity-related instruments across market capitalisation.
HDFC ELSS Tax saver is benchmarked against NIFTY 50 – TRI as a primary index and NIFTY 500 – TRI as a secondary index. Being a tax-saving scheme, it has a mandatory lock-in period of 3 years, making it suitable for long-term investors.
Quant ELSS Tax Saver Fund is an open-ended equity scheme and belongs to Quant Mutual Fund. It is a popular tax-saving scheme launched in March 31, 2000, with an AUM of Rs 7,237.64 crore.
Quant Mutual Fund, established in 1996, is a pioneer in the Indian mutual fund industry with a rich legacy of over 22 years. They endeavour to focus on generating alpha through active management and dynamic asset allocation, adapting to changing market conditions.
Quant ELSS Tax Saver Fund is benchmarked against NIFTY 50 – TRI as a primary index and NIFTY 500 – TRI as a secondary index. Being a tax-saving scheme, it has a mandatory lock-in period of 3 years, making it suitable for long-term investors.
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Investment Style and Philosophy:
– HDFC ELSS Tax Saver Fund: follows a multi-cap, growth-oriented investment style. The fund manager focuses on identifying companies with strong fundamentals, good management, and the potential for long-term sustainable growth across market capitalisations.
– Quant ELSS Tax Saver Fund: the scheme portfolio is constructed from a long-term perspective and follows a Flexicap approach by investing across market capitalisation. The bulk of the portfolio is invested in high-growth companies with attractive valuation and relatively under-owned.
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Performance Comparison: Mutual Fund Returns of Schemes
Scheme Name Absolute (%) CAGR (%) 6 Months 1 Year 3 Years 5 Years 7 Years 10 Years HDFC ELSS Tax saver(G)-Direct Plan 23.27 40.66 24.44 19.85 15.04 17.21 Quant ELSS Tax Saver Fund(G)-Direct Plan 31.78 53.73 34.38 34.43 25.71 27.54 ELSS – Category Average 18.87 33.40 17.03 18.22 15.04 17.07 Benchmark – Nifty 50 TRI 13.16 22.97 14.04 16.72 15.46 15.11 Data as of February 16, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)As we can see from the above table, Quant ELSS has consistently outperformed HDFC ELSS across most timeframes, particularly exceeding by a significant margin in the recent 3 and 5-year periods. However, it's crucial to remember past performance is not a guarantee of future results.
Since its inception, the HDFC ELSS Tax Saver Fund has generated 15.51% CAGR, and Quant ELSS Tax Saver has gained 22.73% CAGR. Both the schemes have consistently outperformed its category average, demonstrating strong performance.
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Portfolio Composition: Asset Allocation of Schemes
Both HDFC ELSS Tax Saver and Quant ELSS Tax Saver are popular choices for tax-saving investments, but their asset allocation strategies differ slightly.
Scheme Name Large Cap % Mid Cap % Small Cap % HDFC ELSS Tax Saver Fund 82.09 6.77 2.52 Quant ELSS Tax Saver Fund 67.14 23.14 9.25 Data as of February 16, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)HDFC ELSS Tax Saver Fund's around 70-80% of the portfolio is invested in large-cap stocks, offering stability and potential for dividend income. A moderate exposure of 10-15% in mid-cap stocks offers some growth potential with higher risk. Less than 5% is in small-cap stocks, minimising risk but also limiting the potential for high returns.
Quant ELSS Tax Saver Fund allocates roughly 60-70% to large and 20-30% to mid-cap stocks, seeking a balance between stability and growth. Similar to HDFC, Quant ELSS has limited exposure, with less than 10% in small-cap stocks.
HDFC ELSS prioritises stability through large-cap focus, while Quant ELSS leans towards a more balanced approach with the potential for higher returns. Both funds limit exposure to small-cap stocks, managing risk but potentially sacrificing some growth potential.
[Read: 4 Best ELSS for 2024 – Top Performing Tax Saving Mutual Funds in India]
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Market volatility: Risk-reward Ratio of Schemes
Investing in ELSS funds offers tax benefits alongside the potential for growth, but understanding their risk-reward profiles is crucial before choosing.
Period HDFC ELSS Tax Saver Fund Quant ELSS Tax Saver Fund Standard Deviation (3 Year) 13.27 18.49 Data as of February 16, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)Quant ELSS boasts a higher SD (18.49%) compared to HDFC ELSS (13.27%), indicating greater historical volatility and potentially higher short-term fluctuations. An investment with high volatility is considered riskier than an investment with low volatility; the higher the Standard Deviation, the higher the risk.
Although Quant ELSS offers potentially higher returns, it exposes you to greater volatility. HDFC ELSS, though slightly less flashy in returns, presents a steadier option. Remember, this comparison is just to give you an idea about the risk profile of both the ELSS. Consider your risk tolerance and investment goals to determine which fund aligns better with your investment strategy.
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Top holdings of the Schemes:
HDFC ELSS Tax Saver Fund leans towards large-cap and blue-chip companies, with its top holdings currently being HDFC Bank, ICICI Bank, HCL Technologies Ltd., Hindustan Aeronautics Ltd., etc. This approach targets stability and consistent returns, potentially appealing to risk-averse investors.
Quant ELSS Tax Saver Fund focuses on growth potential across sectors, with its top holdings currently including Reliance Industries Ltd. Adani Power Ltd., Aurobindo Pharma Ltd. Hindalco Industries Ltd., Sun Pharma Ltd. and JIO Financial Services Ltd.
This strategy prioritizes identifying undervalued stocks with high growth potential, but may involve higher volatility compared to HDFC ELSS.
HDFC ELSS Tax Saver Fund Quant ELSS Tax Saver Fund Company % Assets Company % Assets ICICI Bank Ltd. 9.56 Reliance Industries Ltd. 10.02 HDFC Bank Ltd. 9.30 Adani Power Ltd. 7.42 HCL Technologies Ltd. 5.39 Aurobindo Pharma Ltd. 5.83 Hindustan Aeronautics Ltd. 5.36 Hindalco Industries Ltd. 5.42 Cipla Ltd. 5.23 Sun Pharmaceutical Industries Ltd. 5.41 State Bank Of India 4.77 JIO Financial Services Ltd. 5.27 Bharti Airtel Ltd. 4.62 Britannia Industries Ltd. 5.07 Axis Bank Ltd. 4.53 GAIL (India) Ltd. 5.04 SBI Life Insurance Company Ltd. 4.48 Bharat Heavy Electricals Ltd. 4.69 Apollo Hospitals Enterprise Ltd. 3.54 Grasim Industries Ltd. 4.16 Data as of February 16, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)
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Expense Ratio of the Schemes
When comparing ELSS funds, the Expense Ratio, which represents the annual fee charged, plays a crucial role in determining your returns. Here's a quick breakdown of HDFC ELSS Tax Saver Fund and Quant ELSS Tax Saver Fund:
Scheme Name Direct Plan Expense Ratio Regular Plan Expense Ratio HDFC ELSS Tax Saver Fund 2.02% 2.26% Quant ELSS Tax Saver Fund 1.50% 1.74% Data as of February 16, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)Quant ELSS offers a lower expense ratio in both direct and regular plans, indicating potentially higher net returns for investors compared to HDFC ELSS. While the expense ratio shouldn't be the sole decision factor, it's a vital aspect to consider, especially for long-term investments like ELSS funds. Remember, a lower expense ratio translates to potentially higher returns over time.
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Suitability of Investors to the Schemes:
HDFC ELSS Tax Saver Fund could be suitable for investors seeking moderate risk and long-term capital appreciation through established companies. Since it offers:
– Stability and diversification through a large-cap focus
– Moderate risk appetite
– Long-term wealth creation potential
Quant ELSS Tax Saver Fund could be ideal for investors comfortable with higher volatility and seeking aggressive long-term growth through potential stock outperformance. It offers:
– Higher potential returns through a balanced portfolio
– Slightly higher volatility
– Value and quality-oriented approach
To summarise…
Both HDFC ELSS Tax Saver Fund and Quant ELSS Tax Saver Fund are well-established funds with proven track records. While Quant ELSS boasts higher returns, its balanced portfolio approach might pose a slightly higher risk compared to HDFC ELSS’s large-cap tilt.
Bear in mind, past performance is not an indicator of future results. Both funds remain subject to market risks. Ultimately, the choice depends on your individual risk profile, investment horizon and goals. Remember, diversification across multiple ELSS funds can further manage risk and optimize your tax-saving strategy.
This article first appeared on PersonalFN here
