Mutual fund offerings most often exceeded the returns generated by ULIPs in the same category offered by the same investment house, though it might not be a given at all times.
Budget 2018 sparked the mutual funds vs Unit Linked Insurance Plans (ULIP) debate. The imposition of 10 percent long-term capital gains (LTCG) tax on equity-oriented mutual funds led to the insurance industry projecting ULIPs as a better investment option keeping in view the new tax on the rival mutual fund.
Yesterday, we brought you a detailed analysis of the features of both the investment instruments in the story “Tax or no tax, MFs score over ULIPs”.
What does history suggest on the comparative returns of equity-oriented mutual funds and ULIPs? Since an exact comparison is not possible, we tried to look at how mutual fund offerings from the same stable fared over the past couple of years.
We took the help of Paisabazaar.com to look at whether there was any divergence in returns in the offering from the same house. Paisabazaar collated data from three financial houses – HDFC, ICICI and Tata which have both mutual fund and ULIP offerings.
The data shows that mutual fund offerings most often exceeded the returns generated by ULIPs in the same category, though it might not be a given at all times.
In the large-cap space, HDFC’s ULIP large-cap fund generated a 5-year CAGR return of 12.44 percent while its mutual fund offering in the same category – HDFC Top 200 Fund – gave a 15.82 percent return.
However, for ICICI, the large-cap ULIP gave a 5-year return of 13.83 percent against 7.34 percent for its similar mutual fund offering.
When it came to Tata, the story seems to be different. Here, the 5-year return of the large-cap ULIP and Mutual fund were about the same at around 15 percent. Moreover, its mid-cap ULIP delivered a higher 25.91 percent return over 5-years, while the similar mid-cap fund generated 24.84 percent.
However, the balance shifted towards mutual funds when it came to Tata AIA’s multi-cap ULIP Equity fund which generated a 13.70 percent CAGR over 5-years while it was 23.05 percent for the Tata Mutual Fund’s Equity P/E fund.
Below is the snapshot of the data:
ULIPs v/s Mutual Funds
HDFC
| Fund category | HDFC ULIPs | HDFC Mutual Funds | ||||
| Fund Name | 3-year return | 5-year return | Fund Name | 3-year return | 5-year return | |
| Large Cap | Large Cap Fund | 7.48 | 12.44 | HDFC Top 200 Fund | 10.15 | 15.82 |
| Multi cap | Diversified Equity Fund | 14.04 | N/A | HDFC Capital Builder Fund | 14.21 | 20.73 |
| Mid cap | Opportunities Fund | 16.31 | 19.82 | HDFC Mid-cap Opportunities Fund | 16.35 | 25.82 |
ICICI
| Fund category | ICICI ULIPs | ICICI Prudential Mutual Funds | ||||
| Fund Name | 3-year return | 5-year return | Fund Name | 3-year return | 5-year return | |
| Large Cap | Bluechip Fund | 8.81 | 13.83 | ICICI Prudential Focused Bluechip Equity Fund | 11.18 | 17.34 |
| Multi cap | Multi Cap Growth Fund | 11.59 | 17.01 | ICICI Prudential Multicap Fund | 12.16 | 18.48 |
| Mid cap | Not Available | — | — | ICICI Prudential Midcap Fund | 13.18 | 25.31 |
TATA
| Fund category | TATA AIA ULIPs | Tata Mutual Fund | ||||
| Fund Name | 3-year return | 5-year return | Fund Name | 3-year return | 5-year return | |
| Large Cap | Large Cap Equity Fund | 8.80 | 15.03 | Tata Large Cap Fund | 9.43 | 15.06 |
| Multi cap | Equity Fund | 8.31 | 13.70 | Tata Equity P/E Fund | 16.40 | 23.05 |
| Mid cap | Whole Life Mid Cap Equity Fund | 16.77% | 25.91 | Tata Midcap Growth Fund | 13.27 | 24.84 |
**Returns as on January 31, 2018
