When selecting an equity savings fund, check its net equity exposure

Conservative investors keen to reduce volatility should choose a scheme with 15% net equity exposure

Many conservative investors would like to earn slightly more than fixed-income returns. To achieve this, some opt for low-rated bonds, while others explore equities. Equity Savings Funds (ESFs), which have total assets under management of Rs 19,311 crore, offer a mix of both equity and debt in a tax-efficient way.

How do they work?

An ESF allocates between 15 and 35 per cent of the fund to stocks, known as “net equity exposure”. The fund manager then engages in cash-future arbitrage trades so that the gross exposure to equity and equity-related instruments reaches at least 65 per cent of the