NFO Pick – (Bajaj Finserv Equity Savings Fund)

4 Aug 2025 , 01:32 PM

WHY EQUITY SAVINGS FUNDS?

Equity savings funds combine pure equity, debt, and arbitrage positions (cash-futures). This creates a conservative portfolio with moderate risk.  However, fund manager has the discretion of toggling exposure and deciding how much pure equity positions to hold and how much to hedge. That depends on the outlook for markets. The allocation in the Fund is intended to be 20% in pure equity, 45% in arbitrage, and 35% in debt.

By maintaining net equity position at 65% and above, the equity savings fund gets the added benefit of being classified as an equity fund for tax purposes. The debt portion would only be in high quality AAA rated debt or sovereign debt to eliminate default risk. While the pure equity exposure will be based on the GARP (growth at reasonable price) formula, the arbitrage positions will help to earn regular income, while benefiting from volatility spreads.

DOES AN EQUITY SAVINGS FUND REALLY DELIVER THE GOODS?

If one compares the returns on equity savings fund with that of a pure debt investment, then there is alpha due to the improved equity performance and also due to preferential tax treatment. For instance, the returns on an equity savings fund in post-tax terms are roughly 350 bps on post tax basis, which is actually quite substantial.

Interestingly, as you hold equity savings funds for longer periods, the benefits of post-tax returns become more pronounced. For instance, over a 1-year period, advantage of post-tax alpha over pre-tax alpha in equity savings funds in just 10 bps. However, this goes up to 90 bps over 3 years and to 100 bps over 5 years. Clearly, beyond 3 years, you get best gains.

HOW EQUITY SAVINGS FUNDS PERFORMED IN INDIA?

Here is a quick look at the performance of existing equity savings funds in India.

Scheme Name	Return (%) 1-Year	Return (%) 3-Years	Return (%) 5-Years	Daily AUM (₹ in Crore)
HSBC Equity Savings Fund	2.41	12.79	13.58	655.42
Sundaram Equity Savings Fund	5.67	11.78	13.21	1,116.40
HDFC Equity Savings Fund	3.51	10.63	12.65	5,673.93
Mirae Asset Equity Savings Fund	5.97	11.32	12.64	1,574.27
SBI Equity Savings Fund	5.03	11.47	12.13	5,737.51
UTI Equity Savings Fund	4.04	10.91	11.94	709.42
Mahindra Manulife Equity Savings Fund	2.62	9.95	11.64	551.87
Kotak Equity Savings Fund	3.41	11.53	11.47	8,452.12
DSP Equity Savings Fund	6.22	10.42	11.43	3,500.84
Edelweiss Equity Savings Fund	7.31	11.31	10.79	750.38
Data Source: AMFI

There are a total of 23 equity savings funds in India managing a combined AUM of ₹48,909 Crore. The average returns over different time frames are as follows 1-year (4.89%), 3-Years (10.10%), and 5-Years (10.76%). The last two are CAGR returns. However, as time frame expands to 3 and 5 years, the average returns go up, and the risk-adjusted returns also become much stronger for equity savings funds.

GLANCE AT THE BAJAJ FINSERV EQUITY SAVINGS FUND NFO

Here are key details of the Bajaj Finserv Equity Savings Fund NFO.

• NFO opened on July 28, 2025 and closes on August 11, 2025. It is a Hybrid equity savings fund, combining pure equity, debt, and arbitrage positions in a single portfolio. The fund performance will be indexed to the Nifty Equity Savings TRI.
• On the risk-o-meter, Bajaj Finserv Equity Savings Fund is classified as “Moderate Risk,” due to its predominant allocation to arbitrage positions. However, the internal allocation shifts between equity, debt, and arbitrage will be on the discretion of the fund manager.
• The Bajaj Finserv Equity Savings Fund is best suited to conservative investors looking to generate short term income through the fund. Arbitrage provides a more tax-efficient method of parking funds compared to liquid funds, which are pure debt funds.
• The Fund offers Regular and Direct plans. It also offers Growth option and IDCW option to investors. There will be specialized fund managers; Sorbh Gupta (Equity Portion), Siddharth Chaudhary (Debt Portion), and Ilesh Savla (Arbitrage Allocation).
• Minimum application amount in NFO is ₹500 and multiples of ₹1 thereof. Subsequent additional investments will be of minimum ₹100. The fund structure supports SIPs, SWPs, and STPs too. There is no guarantee on returns on the fund.
• There will be an exit load of 0.25% of applicable NAV, if redeemed within 7 days of allotment. Any redemption beyond 7 days does not attract exit load. However, investors are advised to take a minimum time frame of 3-5 years for best results.

Bajaj Finserv Equity Savings Fund will be classified as an equity fund for tax purposes. Hence, LTCG will be taxed at 12.5% above ₹1,25,000 per financial year. STCG will be taxed at 20.8% (including cess). The cut off for long term will be a holding period of 1 year or more.