The Hindu Business Line : Principal Personal Taxsaver: Book profits

INVESTORS can use the recent upsurge in stock prices to book profits on their holdings in the Principal Personal Tax Saver, if they have completed their three-year lock-in period with the fund. The fund's performance has flagged over the past two years, after a good initial run. The returns for a one-year period, at 31 per cent, lag market indices such as the Nifty and the Sensex.

Several other funds in the tax planning space, such as HDFC Taxsaver, HDFC Long Term Advantage and PruICICI Tax Plan, have performed better over the same time-frame. Principal Personal Taxsaver has also trailed the category average for diversified equity funds for one- and three-year periods. The fund entered Principal's fold on the takeover of Sun F&C Mutual's schemes by the former. It was earlier known as Sun F&C Personal Taxsaver.

The fund has still delivered an impressive performance for those who invested with it during launch in 1996. Those who invested in the Personal Tax Saver at launch would have seen their investment grow twelve-fold since then. However, the recent slowdown in performance has weighed on the fund's five-year and three-year return record.

Moreover, the fund's track record prior to 2003 may not be entirely relevant as the management has changed hands from Sun F&C to the Principal group.

The portfolio has seen considerable change over the past few months and has acquired a distinct bias towards mid-cap stocks. About 80 per cent of its assets are invested in stocks with a market capitalisation of less than Rs 3,000 crore.

Principal Personal Tax Saver received substantial inflows over the past few months. Between June and October 2005, the fund's net assets have grown from about Rs 6 crore to Rs 17 crore.

This period saw the fund replace a significant chunk of its portfolio. A slew of mid-cap stocks such as Astra Microwave, Bharat Bijlee, Concor and Max India were added. Large-cap stocks such as Mahindra & Mahindra, Arvind Mills, L&T were excluded.

The fund seems to be adopting a phased approach to investing inflows, as it had a significant cash position by end-October. Given the substantial rejig of the portfolio, some of the recent stock choices that the fund has made may have the potential to pay off for investors.

However, for investors who prefer a tax saving fund, there are funds with a more convincing track record of recent as well as long-term performance. New investments in the Principal Personal Tax Saver can thus be held off until it accumulates a better record.

Fund facts: Principal Personal Tax Saver was launched in 1996 by Sun F&C Mutual Fund. It has since moved to Principal PNB Mutual Fund consequent to the latter's takeover. The fund carries a minimum investment of Rs 500 and an entry load of 2.25 per cent.

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