A Fund for your child’s portfolio
If you are looking to build wealth for your child’s future, HDFC Children’s Gift fund – Investment Plan is a good option. With a sound track record, this equity-oriented balanced fund has outperformed the average returns of pure equity funds over three and five-year periods. The fund can hold about a fourth of its assets in debt. It has used this mandate to effectively contain declines better than pure equity funds.
HDFC Children’s Gift delivered 17 per cent compounded annually in the last three years, beating peer funds from the same stable – HDFC Prudence and HDFC Balanced.
Suitability
This fund is suitable for investors looking to build a long-term kitty (at least five years) for their child. Investments can be made only in the name of a minor child. (At FundsIndia, you can invest in this fund through a minor’s account).
Within the investment plan there are two options: one, you can hold the fund and withdraw anytime, subject to exit load. Another option locks the investment for up to three years or when the minor turns 18, whichever is later. If you go for the latter, ensure that you stop SIPs at least three years before your goal date as each SIP will be subject to lock-in.
Opt for investments through the SIP route. Over the last five years, an SIP in the fund would have delivered a good 17 per cent internal rate of return.
Performance
HDFC Children’s Gift outperformed top peers HDFC Prudence, HDFC Balanced and Reliance Regular Savings in the last three years by a good 2-7 percentage points. Its five-year return, though, lagged these peers by 1-2 percentage points. Lower mid-cap exposure compared with peers and adherence to a maximum of 75 per cent equity exposure (while some peers go up to 80 per cent) meant that its participation in such rallies is a bit capped. But its average returns (on a rolling basis) stood better at 15 per cent a year over the above period, suggesting that the point-to-point returns is influenced by market conditions.
In the last one year too, it could not beat its index only because the index has a 40 per cent weight to debt (as against 20 per cent by the fund now). Debt as a category has done well in the current high interest scenario.
Portfolio
HDFC Children’s Gift has one half of its equities in large-cap stocks of over Rs 10,000 crore market cap. VST Industries, FAG Bearings and Eclerx services are some of the stocks in the mid-cap space that have delivered well for the fund in the past one year.
Stocks from the pharma, banking and FMCG sectors account for over a third of the assets while the rest are in sectors including software, industrial products and auto ancillaries.
Most of the fund’s holdings in debt are in triple-A rated instruments issued by private players such as HDFC and ICICI Bank and public sector companies such as Indian Railways Finance Corporation and Power Finance Corporation.
Chirag Setalvad and Rakesh Vyas manage the fund.
Also read our post on the free personal accident insurance cover, offered by the AMC with this fund.
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Nice review. The fund looks balanced and investment sectors seems to well distributed and even the expense is low. Thanks for taking feedback and comparing it with category toppers. Really, liked you taking the time to explain why it did score above the toppers in the past.
Vidya,
Interesting read this morning in the inbox. One of the things that has always perplexed me about the Indian MF market is the almost blatant disregard to widely accepted FS sales practices to make up sexy product labels and disguising them as silver bullet to the end customer. Look at this fund for instance – if one has a 5-10 year investment horizon with a moderate risk appetite, one could simply pick up any well performing hybrid fund with a large cap bias. Now whether one uses that money for ‘Children’s gift’, ‘Daughter’s marriage’ or ‘Father’s shraddh ceremony’ is entirely upto oneself.
The average uninformed Indian investor who is blinded by 6 month, 1 year and 3 year return figures when choosing funds (while conveniently avoiding RAR), understands very little of sharpe or sortino ratios, alpha, or r-squared. They buy fund because the name promises prosperity for their children.
I see fund houses as the main culprits here – why; wouldn’t you think the objectives of ‘Children’s gift’ could have been replicated by a simple combination of HDFC Prudence and HDFC Top 200? One needn’t even go to another fund house!
In conclusion, there’s a lot more SEBI has to do in driving responsible fund management. Although the days of daily-new-NFO are behind us, there is so much more room for improvement.
Regards
Kundan
Hi Vidya,
From taxation point of view, HDFC Children’s Gift – “Investment Plan” is treated as equity mutual fund or debit mutual fund, as there is no tax on long term capital gains in equity fund.
Regards
Chakradhar
Hello sir, The investment plan of HDFC Children’s Gift is an equity fund for tax purposes. The savings Plan is debt. Tks, Vidya
I have started sip in SBI gold fund for 3 yrs. but expert say this is wrong decision. What I do? Pls guide. Thanks
hello Daya, If you have a 3-5 year view and do not have high exposure (limited to say 10% of total portfolio) then you may continue SIPs. SIPs will at elast help average costs at lower prices. Tks.
Hello all,
I am interested in investment between 10 – 15 yrs with SIP. I read the above information but confused as to whether go for HDFC childrens gift plan or go for HDFC prudence and HDFC top 200 fund?
Thank you
Hello Rohit,
For a 10-15 years SIP, the children’s gift plan would be a quite conservative choice just by itself. It would invest about 30% in debt market as well. I would advice you to go with a more aggressive allocation – splitting it with an investment in a pure equity fund such as HDFC Top 200 would be a good choice. HDFC Prudence would also be ok, but with children’s gift fund, you will get some insurance benefit as well.
So, if you are planning to invest, say Rs 5000, then split it as Rs 2500 between the children’s fund and the pure equity fund.
thanks,
Srikanth
Thanks a lot. Actually m not interested in insurance plan but would expect gud returns in long term. Would go for hdfc top 200 fund d
Hi Vidya/Srikanth:
Thanks for info on this fund.
What, according to you, makes this fund a better choice as investment for child’s education/future as compared to the other proven balanced/equity funds (e.g. the ones listed on fundsindia select funds page) which have shown the similar performance ?
is it because of this fund’s lock-in that doesn’t allow you to redeem until the child attains the age of 18?
I am planning to invest 5000 monthly towards creating the required corpus for my child’s higher education after 11 years.
Thanks,
Mukesh
Hi Mukesh,
This is also one of our Select funds. This fund has a higher risk-adjusted return because it is less volatile as a result of higher large-caps compared with most balanced funds. Also, while the fund has an open-ended option as well, most investors who invest in this fund, do so for their child (investment in minor’s name only). Hence, they have a long-term horizon and do not seek to redeem on market movements. This can be one other reason for the fund to perform with less pressures on the redemption front. The fund is well suited for your goal and given the insurance cover that comes along. thanks, Vidya
I have a new born baby and would like to invest for her higher education.. I would like to make an SIP.. Which fund should I choose?
Hello Tanvi, sorry for the delayed response. The fund you just read about in this link is a good one t go with. For more specific advisory, you would need to ask your query through your FundsIndia account. thanks, Vidya
Hi vidya,
is it prudent to invest in this scheme at this point through sip.for 10ys horizon and is the insurance cover still available with the scheme
Hello Vidya, Sorry for the delayed response.
Yes, you may invest over that time frame. Personal accident cover is available. thanks, Vidya
I have a new born boy and would like to invest for her higher education.. I would like to make an SIP.. Which fund should I choose? plz advice me.
Hello Jatin, the fund that you have seen in this post is a good option for long-term investment in the name of the child. For more advice, we would need inputs from you. If you are a FundsIndia account holder, pl use the Advisor appointment feature in the help tab and raise your query to our advisors.They will help you based on your surplus, risk appetite and time frame. thanks, Vidya
I have a new born baby and would like to invest for her higher education.. I would like to make an SIP.. Which fund should I choose?
Hello Tanvi, sorry for the delayed response. The fund you just read about in this link is a good one t go with. For more specific advisory, you would need to ask your query through your FundsIndia account. thanks, Vidya
Hi Vidya/Srikanth:
Thanks for info on this fund.
What, according to you, makes this fund a better choice as investment for child’s education/future as compared to the other proven balanced/equity funds (e.g. the ones listed on fundsindia select funds page) which have shown the similar performance ?
is it because of this fund’s lock-in that doesn’t allow you to redeem until the child attains the age of 18?
I am planning to invest 5000 monthly towards creating the required corpus for my child’s higher education after 11 years.
Thanks,
Mukesh
Hi Mukesh,
This is also one of our Select funds. This fund has a higher risk-adjusted return because it is less volatile as a result of higher large-caps compared with most balanced funds. Also, while the fund has an open-ended option as well, most investors who invest in this fund, do so for their child (investment in minor’s name only). Hence, they have a long-term horizon and do not seek to redeem on market movements. This can be one other reason for the fund to perform with less pressures on the redemption front. The fund is well suited for your goal and given the insurance cover that comes along. thanks, Vidya
I have a new born boy and would like to invest for her higher education.. I would like to make an SIP.. Which fund should I choose? plz advice me.
Hello Jatin, the fund that you have seen in this post is a good option for long-term investment in the name of the child. For more advice, we would need inputs from you. If you are a FundsIndia account holder, pl use the Advisor appointment feature in the help tab and raise your query to our advisors.They will help you based on your surplus, risk appetite and time frame. thanks, Vidya
Hi vidya,
is it prudent to invest in this scheme at this point through sip.for 10ys horizon and is the insurance cover still available with the scheme
Hello Vidya, Sorry for the delayed response.
Yes, you may invest over that time frame. Personal accident cover is available. thanks, Vidya
I have started sip in SBI gold fund for 3 yrs. but expert say this is wrong decision. What I do? Pls guide. Thanks
hello Daya, If you have a 3-5 year view and do not have high exposure (limited to say 10% of total portfolio) then you may continue SIPs. SIPs will at elast help average costs at lower prices. Tks.
Hello all,
I am interested in investment between 10 – 15 yrs with SIP. I read the above information but confused as to whether go for HDFC childrens gift plan or go for HDFC prudence and HDFC top 200 fund?
Thank you
Hello Rohit,
For a 10-15 years SIP, the children’s gift plan would be a quite conservative choice just by itself. It would invest about 30% in debt market as well. I would advice you to go with a more aggressive allocation – splitting it with an investment in a pure equity fund such as HDFC Top 200 would be a good choice. HDFC Prudence would also be ok, but with children’s gift fund, you will get some insurance benefit as well.
So, if you are planning to invest, say Rs 5000, then split it as Rs 2500 between the children’s fund and the pure equity fund.
thanks,
Srikanth
Thanks a lot. Actually m not interested in insurance plan but would expect gud returns in long term. Would go for hdfc top 200 fund d
Hi Vidya,
From taxation point of view, HDFC Children’s Gift – “Investment Plan” is treated as equity mutual fund or debit mutual fund, as there is no tax on long term capital gains in equity fund.
Regards
Chakradhar
Hello sir, The investment plan of HDFC Children’s Gift is an equity fund for tax purposes. The savings Plan is debt. Tks, Vidya
Nice review. The fund looks balanced and investment sectors seems to well distributed and even the expense is low. Thanks for taking feedback and comparing it with category toppers. Really, liked you taking the time to explain why it did score above the toppers in the past.
Vidya,
Interesting read this morning in the inbox. One of the things that has always perplexed me about the Indian MF market is the almost blatant disregard to widely accepted FS sales practices to make up sexy product labels and disguising them as silver bullet to the end customer. Look at this fund for instance – if one has a 5-10 year investment horizon with a moderate risk appetite, one could simply pick up any well performing hybrid fund with a large cap bias. Now whether one uses that money for ‘Children’s gift’, ‘Daughter’s marriage’ or ‘Father’s shraddh ceremony’ is entirely upto oneself.
The average uninformed Indian investor who is blinded by 6 month, 1 year and 3 year return figures when choosing funds (while conveniently avoiding RAR), understands very little of sharpe or sortino ratios, alpha, or r-squared. They buy fund because the name promises prosperity for their children.
I see fund houses as the main culprits here – why; wouldn’t you think the objectives of ‘Children’s gift’ could have been replicated by a simple combination of HDFC Prudence and HDFC Top 200? One needn’t even go to another fund house!
In conclusion, there’s a lot more SEBI has to do in driving responsible fund management. Although the days of daily-new-NFO are behind us, there is so much more room for improvement.
Regards
Kundan