Most ULIPs under-perform Nifty

Equity mutual funds have not managed to contain the declines in their NAV well during the recent market fall, with majority of them trailing the broad market. But did equity-oriented unit-linked insurance plans (ULIPs) from insurance companies manage to do better? 

We took a few schemes which have a track record of at least two-three years. Equity-oriented ULIPs from insurance companies posted a decline of 6.2 per cent in their NAV over the past one year. This compares with the six per cent decline for the Nifty and 11.9 per cent for diversified equity funds as a category. 

Most of the ULIPs trailed the Nifty, with the fund with the maximum decline being Bajaj Allianz Unit Gain Plus Growth (down 11 per cent) and the best – ING Vysya Unit Link Growth. It has lost just one per cent.

ULIPs, however, may not be strictly comparable to equity mutual funds as many of them have lower equity allocations as compared to the former. ULIPs also usually have a focus on large-cap stocks, when compared to equity mutual funds which actively invest in the mid-cap space. In some cases, ULIPs have an inbuilt option that allows the fund manager to move a certain portion of assets to debt or cash, based on the market conditions. However, effective return for investors in ULIPs will not be determined by NAV returns alone; expenses which can account for a significant proportion of initial premia may also have a bearing on returns

“Growth” plans of ULIPs usually invest anywhere between 80-100 per cent in equity and rest in debt. Going by its latest portfolio, ICICI Prudential Life Time Pension Maximer (return negative 7.6 per cent) has invested 95 per cent of the assets in equity and the rest in debt. 

Bajaj Allianz Unit Gain Plus Equity Growth Fund (return negative 11 per cent) has invested 89 per cent of the assets in equity, with its top ten stocks mainly from the large-cap space.