Rolling Returns in ULIP

Rolling returns in ULIP are the annualised returns of a fund calculated across multiple overlapping time windows. For example, every 3-year period within a 10-year history. They are not based on one fixed start-to-end date. Unlike trailing or point-to-point returns, rolling returns show whether a ULIP fund gives consistent performance across market cycles.

When comparing ULIP funds, a single return figure can be misleading. A fund that delivered 15% over five years may have performed exceptionally well in just one favourable market phase and struggled during the rest. This is the major constraint of point-to-point returns and the reason why rolling returns matter.

Investors and fund analysts, therefore, look at rolling returns as well.

Rolling returns are similar to point-to-point calculations. However, rather than measuring returns from one start date to one end date, they measure ULIP performance throughout several overlapping periods. This helps investors in understanding the performance of a ULIP fund amid market fluctuations.

Rolling returns are a more reliable and consistent way of comparing ULIP fund performance for long-term investors, as they reduce timing bias and highlight consistency over time.

Rolling returns in ULIP are annualised returns calculated for all possible fixed-duration periods within a fund’s history. For a ULIP fund with a 10-year history, the 3-year rolling return is calculated for every available 3-year period within that data. Doing this helps produce thousands of data points, based on the frequency used.

Unlike point-to-point or trailing returns, which compare NAV (Net Asset Value) performance between one start date and one end date, rolling returns analyse every possible period of returns within the selected timeframe. This gives a broader and more consistent view of fund performance across market conditions.

Cricket presents a simple scenario to help understand this. Trailing returns are like judging a cricketer based on one innings, whereas rolling returns evaluate the player’s performance in every innings in a season.

Rolling returns can be measured over different time frames, such as:

• 1-year rolling return
• 3-year rolling return
• 5-year rolling return
• 10-year rolling return

Different frequencies, such as daily/weekly/monthly data, can be used for return calculation. To obtain accurate returns, use the Axis Max Life ULIP calculator online.

The rolling return formula helps investors calculate annualised returns for all overlapping investment windows.

Rolling Return = [(NAV at End of Window ÷ NAV at Start of Window) ^ (1/n)] − 1

Where:

• n = number of years in the rolling window. For instance: use 3 for a 3-year rolling period

Rolling Return Calculation:

• Assume a ULIP fund's NAV was ₹20 on 1 Jan 2021 and ₹30 on 1 Jan 2024 for a 3-year window.
• Rolling Return = [(30/20)^(1/3)] − 1 = [1.5^0.333] − 1 = 1.1447 − 1 = 14.47% per annum.
• Repeat the method for each 3-year window by shifting the start date each day. This gives the rolling return distribution.
• If the fund's rolling return stays above 12% in more than 80% of all windows, it indicates consistent performance.

Trailing returns measure performance from one start date to one end date. Rolling returns measure ULIP fund’s performance across multiple overlapping periods. The following is a quick comparison between rolling returns vs trailing returns based on certain comparison points:

Trailing returns show where a fund ended up over a specific period. Rolling returns show how consistently it delivered performance across market conditions. This makes rolling returns a much more reliable and better metric for ULIP fund evaluation.

Annual returns, trailing returns, and rolling returns each evaluate fund performance differently.

• Annual returns show how a fund performed in a specific year.
• Trailing returns provide returns from a specified period.
• Rolling returns offer a deeper view by measuring consistency in different time frames and market cycles.

Investors can evaluate these differences to choose the right performance metric.

Rolling returns are one of the most reliable indicators of ULIP fund performance. However, professional analysts also consider other metrics at the same time to assess risk, consistency, and fund management quality.

Rolling returns remain the primary indicator of consistent ULIP fund performance. Axis Max Life publishes trailing returns, Sharpe ratios, and detailed fund fact sheets for all its ULIP products. This enables investors in retirement planning with the use of deeper performance metrics, which is not limited to trailing returns.

You may view Axis Max Life ULIP fund performance reports and monthly factsheets for more details.

Rolling returns are widely used in both ULIPs and mutual funds. However, there are certain differences that investors should consider. ULIPs combine the advantages of investment plans and life insurance.

ULIP fund switching is generally tax-free. This means rebalancing between equity and debt ULIP funds based on rolling return analysis does not attract tax. In mutual funds, similar rebalancing may invite capital gains tax, typically 20% for short-term gains and 12.5% for long-term gains.

This flexibility allows long-term investors to optimise portfolio allocation in a more efficient way under changing market conditions.

The systematic use of rolling returns can improve fund selection. Investors can compare ULIP fund performance in a structurally effective way.

This approach helps investors move beyond headline return figures and select funds based on data-backed performance. You can check Axis Max Life ULIP fund performance and rolling return data when you need to make a decision.

A good rolling return depends on the fund category, benchmark, and consistency. Investors should focus not only on the higher returns they can achieve but also on how frequently the fund outperforms its benchmark.

Note: The numbers shown above are indicative benchmarks based on historical performance of the market. They should not be treated as guaranteed returns.

A good ULIP fund does not always give the highest average rolling return. A fund that delivers a consistent 13% across market conditions may can considered more reliable than a fund that delivers an inconsistent 16%.

Consistency and benchmark outperformance are key factors in long-term ULIP fund performance.

Rolling returns are used to measure the past performance of ULIP funds. They also allow investors to identify when a fund starts losing consistency over time.

Let’s understand this with an example. If the 3-year rolling returns of a ULIP fund remain below the category average for 6 months or more, it may indicate prolonged underperformance when the markets are volatile. This trend can act as a data-driven signal for investors to review their allocation and switch to a better-performing fund.

This is where ULIPs provide long-term investors with a strategy-based advantage.

In mutual funds, acting on such signals may involve capital gains tax, either short-term at 20% or long-term at 12.5%, depending on the holding period and applicable rules. In ULIPs, switching between equity, debt, or even balanced funds is generally tax-free under Section 10(10D), subject to conditions and current regulations.

This flexibility helps improve portfolio efficiency over a 10 to 20-year horizon. Investors can rebalance based on rolling return trends without recurring tax outflows that reduce long-term compounding.

Another advantage of ULIP plans is behavioural discipline. Since switching does not trigger immediate tax, investors may be willing to rebalance based on long-term performance consistency.

You may explore Axis Max Life ULIP plans and fund switching options for more details.