Five top-performing retirement mutual funds

A formal salaried job with social security benefits such as employee provident fund (EPF), pensions, paid leave and healthcare benefits is the best way to plan for retirement. But well-paying jobs with social security benefits are now vanishing in India and casualisation and self-employment are on the rise, according to government data.

According to the latest Periodical Labour Force Survey (PLFS) data, the overall rate of self-employed people in India increased to 57.3 percent of the total workforce in 2022-23 from 55.8 percent in 2021-22 and 55.6 percent in 2020-21. 

Similarly, there has been a slowdown in the pace of formal job creation, and new subscribers to Employees’ Provident Fund Organisation (EPFO) declined by 10.1 percent to 5.86 million in the first half (April-September) of FY24. It was 6.52 million during the same period last year, according to the latest payroll data released by the EPFO.

This means that an increasing number of workers and professionals will have to do their retirement planning. Retirement Funds are one of the best ways to save and invest for your retirement. 

Most fund houses offer three investment options or plans to investors in retirement mutual funds – aggressive funds that largely invest in equities; hybrid plans that invest in both equity and debt and conservative plans that largely invest in bonds and other fixed-income securities. 

Aggressive or equity-oriented schemes offer the potential of maximum returns but are also risky while conservative funds are least risky and are most suitable for investors in their 50s. A smart option is to spread your money in a basket of four to five best funds across all-equity and hybrid retirement funds to minimise the downside risk.

Also Read: 5 steps to kick-start your financial planning for retirement

Here are five retirement mutual funds that have offered the most consistent returns in the last five years or since their inception (in the case of younger funds). All data has been sourced from the ICRA Analytics Mutual Fund database.

1. At the top of our list is the HDFC Retirement Savings Fund - Equity Plan. The fund with assets under management of around Rs 3740 crore has given 23.8 percent returns in the last 12 months, nearly twice the category average returns of 13.3 percent during the period and a 6 percent rise in the BSE Sensex during the period. 

One of the oldest funds in the category, it's a growth-oriented scheme with 90 percent of the AUM invested in large-cap stocks such as HDFC Bank, ICICI Bank, Infosys, Reliance Industries and State Bank of India.

2. The next fund on our list is Nippon India Retirement Fund - Wealth Creation Scheme which has given 19.4 percent returns in the last one-year beating its category and the Sensex by a big margin. It's a growth-oriented fund with 98 percent of its current AUM of around Rs 2554 crore invested in equities. Unlike many of its peers, the fund also invests in mid and small-cap stocks. The top five stocks in its portfolio include HDFC Bank, ICICI Bank, Reliance Industries, Tata Consultancy Services and Bosch Ltd.

Also Read: Five golden rules to retire rich

3. Tata Retirement Savings Fund - Progressive Plan is next on our list with 20.6 percent returns in the last one year which is among the highest in its category. One of the oldest schemes in the category with an AUM of Rs 1512 crore, it's a growth-oriented scheme with 93.4 percent of its AUM invested in a mix of large-cap, mid-cap and small-cap stocks. Its five biggest investments are HDFC Bank, ITC, Reliance Industries, ICICI Bank and Solar Industries.

4. The fourth-ranked fund in our list is ICICI Prudential Retirement Fund - Pure Equity Plan with 23.6 percent returns in the last one year which is one of the best in its category. It is a relatively small fund with an AUM of Rs 367 crore but its score is high on risk-to-reward ratio parameters such as standard deviation and Sharpe ratio. It is a growth-oriented scheme with 96 percent of its AUM invested in equities. Its top five investments are Ultratech Cement, Bharat Petroleum Corp, Bharti Airtel, Maruti Suzuki and DLF Ltd.

5. Tata Retirement Savings Funds - Moderate Plan is the fifth fund in our list with 18.4 percent returns in the last one year. It's a hybrid fund with 20 percent of its total AUM of Rs 1734 crore currently invested in bonds and other debt instruments. Its top five equity investments are HDFC Bank, Reliance Industries, ITC, ICICI Bank and Solar Industries.

Happy Investing!

(Karan Deo Sharma is a Mumbai-based finance and equity markets specialist). 

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