Last Updated on December 29, 2021 at 5:19 pm
Let us compare two ELSS funds, Mirae Asset Tax Saver Fund and Axis Long Term Equity Fund and find out how they fare in terms of returns and risk. The Mirae fund started in Dec 2015 and now has an AUM of a little of 3000 Crores and an inviting expense ratio of 0.28%. The Axis fund was launched in Dec 2009, now has an AUM of 21,473 Crores (thanks to Axis Bank) and an expense ratio of 0.92%.
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Regular readers may be aware that both funds have been reviewed in detail earlier: (1) Mirae Asset Tax Saver Fund: Looking for an ELSS Fund away from the crowd? and (2) Axis Long Term Equity Fund Review: Has performance slipped? This article not only serves as an update on these funds but also a simple method to study fund performance and compare funds.
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Let us start with the performance of both funds since the inception of the Mirae Tax Save Fund. The Mirae fund is the clear winner here. BSE 200 the benchmark of the Axis fund and representative of the stock universe of both funds is also shown for comparison. Nifty 200 is the benchmark for the Mirae fund.
Notice that Axis Long Term Equity Fund has picked up performance in the last few months after struggling to keep pace with BSE 200. Is this an AUM size effect? Hard to say for sure, especially now when there is some recovery.
Mirae Asset Tax Saver Fund vs Axis Long Term Equity Fund: Market Cap History
Now let us look how these funds have allocated across market cap over time. It should be kept in mind that the asset allocation rules for ELSS funds are determined by the finance ministry and not SEBI. While ELSS fund should hold 80% Indian Equity at all times, they can invest in across market cap any which they want.
That said, most ELSS funds tend to be large-cap oriented and these two are no exceptions.
Notice that Axis Long Term has more of midcap exposure than Mirae Tax saver during a time when mid caps were down and the recovery of the fund is because of a noticeable increase in large cap stocks.
Returns and Risk Comparison
Using the Jan 2020 Equity Mutual Fund Performance Screener we find the excess risk and excess return of Axis Long Term Equity Fund and Mirae Tax Saver Fund with respect to Nifty 100 TRI.
The excess risk here means the standard deviation of the fund minus standard deviation of the index. Ideally, this should be negative – the fund has a lower standard deviation (volatility) than the index. Excess return here means fund return minus index return and this should obviously be positive.
Mirae has managed to beat the index with lower risk in the last 1,2 years (as on 14th Jan 2020). However, there is practically nothing to separate the two funds in terms of returns and volatility.
| 1Y | Excess Risk | Excess Return |
| Axis LTE | 0.30% | 7.28% |
| Mirae TS | -0.13% | 5.01% |
| 2Y | ||
| Axis LTE | 0.44% | 2.4% |
| Mirae TS | -0.04% | 0.3% |
| 3Y | ||
| Axis LTE | 0.18% | 3.9% |
| Mirae TS | 0.05% | 4.4% |
| 4Y | ||
| Axis LTE | 0.23% | 1.0% |
| Mirae TS | 0.13% | 6.4% |
| 5Y | ||
| Axis LTE | 0.01% | 2.6% |
| Mirae TS | NA | NA |
Downside protection consistency
Next, we check how consistently the funds have managed to fall lower than the index (Nifty 100) when the index gave a negative monthly return. Higher the value, the better. Note: this is a measure of how often the downside capture ratio was less than 1 over the last 1,2,3,4,5 years.
| Tenure | Axis LTE | Mirae TS |
| 1Y | 63% | 82% |
| 2Y | 72% | 100% |
| 3Y | 73% | 100% |
| 4Y | 84% | 100% |
| 5Y | 100% | NA |
The Mirae fund is a bit better in falling lower than the index, but there is not much difference here too!
Summary: Which fund to choose? What should current investors do?
There is very little to differentiate between the two funds. One should not get carried away by the since-inception performance of Mirae Tax Saver Fund and look closely. In spite of its large AUM, Axis Long Term Equity has done quite well. Both investors can continue holding the fund if they 80C benefits. New investors can choose the Mirae fund because of its lower expense ratio. However, this may not remain low. The AMC may just be waiting for enough AUM to accumulate and jack it up. See: Why SEBI should stop frequent mutual fund expense ratio changes
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