imgbd Tata Retirement Savings Fund

Retirement ke pehle bhi, aur baad bhi

Sonam Udasi, Fund Manager, Tata MF




10th April 2017

In a nutshell

Tata Retirement Savings Suite of funds offer a truly comprehensive retirement solution - before and after retirement. There's an automated life stages linked asset allocation that progressively reduces the equity component as age approaches retirement and upon retirement, there's also an automated SWP on monthly/quarterly payout options that can be triggered to generate regular cashflows from the accumulated corpus. Sonam takes us through the product construct and benefits of this comprehensive retirement solution, from a brand that symbolizes trust for millions of Indians.

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WF: Between the three funds within this solution suite - Progressive, Moderate and Conservative, are the fund management style and stock picks similar with the only difference being percentage allocation to equity (equity, balanced and debt oriented respectively)?

Sonam Udasi: That is correct. The Equity portion with relevant weightages are common across these solution based funds. There may be minor weightage differences that may creep up over time, which then are corrected, as far as possible.

WF: Your equity allocations seem to have a 55-60% large cap and 40-45% mid/small cap distribution. Is this ratio constantly maintained or do you dynamically adjust this based on valuation perceptions of market cap segments?

Sonam Udasi: We prefer to keep above 50% in large caps across time frames. Beyond that it is a function of relative attractiveness of what companies we like - we don't use the lens of large cap or mid-cap while evaluating opportunities. Sometimes, we have preferred large caps over midcaps, purely based on relative merit or vice versa.

WF: Some would argue that given the long term nature of flows into this fund, you could perhaps have a larger exposure to mid and small caps as they tend to deliver higher absolute returns over market cycles. How will you react to this observation?

Sonam Udasi: Our focus is to generate long term consistent returns and the track record of this solution based suite has showcased that. In our view, it's not the size of the market cap, but the opportunity that a company offers. If we are able to identify the right themes consistently, then even large cap names are able to contribute to superior fund performance. The large cap names do offer an often under-appreciated benefit called "liquidity", which proves quite handy in volatile situations.

WF: Does this suite of retirement savings solutions enjoy tax benefits while investing, like some of the MF products in the retirement space?

Sonam Udasi: No, currently the investment in the Scheme does not provide the tax benefit under section 80 C.

WF: Are the holding periods in this solution suite demonstrably larger than your other equity funds? Is there a lock in period given the nature of savings you are attracting into this suite?

Sonam Udasi: We do see investors in the Scheme staying for longer time periods as they see this investment as part of their long term saving plan. The Scheme is open ended and hence, there is no lock-in for investors in the Scheme.

WF: Do you have automated facilities for investors to move from Progressive to Conservative as they approach retirement? Is there in other words, an automated life stages functionality available?

Sonam Udasi: Yes, Tata Retirement Savings Fund offers a unique "Auto-Switch" feature which takes away the hassles of adjusting the equity-debt proportion with increasing age. So, if you start an SIP or make a lump sum investment in the "progressive" option and opt for the "Auto-Switch" feature, then the fund will do the needful asset allocation automatically as you cross different age brackets as:

  1. Progressive to Moderate - switch happens once you attain the age of 45 years.

  2. Moderate to Conservative - switch happens once you attain the age of 60 years.

However, the fund also provides the option of staying perpetually invested in a single plan of choice.

WF: Some advisors are pitching MIP oriented solutions with SWPs as retirement income options to generate regular cash flows post retirement. Is there an opportunity to position your Conservative plan as a Retirement Income Solution with an automated SWP that kicks in from retirement date - which can make the investor stay invested in the fund even post retirement?

Sonam Udasi: Tata Retirement Savings Fund is a complete offering focused not only Savings for retirement but also for regular cash flow needs post retirement period. The Conservative plan is an ideal avenue for investors seeking regular flow of cash for their post retirement income requirements. It has an added feature of withdrawing 0.5% of Retirement corpus on monthly or 1.5% on quarterly basis. The investor also has the flexibility to decide on the amount of their choice for systematic withdrawal.

WF: There continues to be a huge untapped opportunity for the MF industry to win larger shares of the retirement savings and retirement income pies. In what ways do you think we can work more innovatively to enhance our share?

Sonam Udasi: In India, a large proportion of working population in India have either not started saving for their retirement or do not have proper plan to save for their retirement. Also, only a minuscule percentage of population is covered under the formal pension plans. This requires us to increase the general awareness levels on the importance of proper retirement planning and saving. We are leveraging communication platforms - electronic, digital & social media - to reach out to the large community of working population. We have always made efforts to simplify investments for general investors through our educative series of Prof. Simply Simple and Suppandi.

Further, we should also make investing simple and process easier for the investors for them to have a seamless investing experience.

Disclaimer: The views expressed in this article are personal in nature and in is no way trying to predict the markets or to time them. The views expressed are for information purpose only and do not construe to be any investment, legal or taxation advice. Any action taken by you on the basis of the information contained herein is your responsibility alone and Tata Asset Management will not be liable in any manner for the consequences of such action taken by you. Please consult your Financial/Investment Adviser before investing.

The views expressed in this article may not reflect in the scheme portfolios of Tata Mutual Fund.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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