Monday, November 17, 2008


NFO Nest
(November 2008)

Waning FMPs …waning NFOs …

At least three fund houses — Franklin Templeton Mutual Fund, Kotak Mutual Fund and Taurus Mutual Fund — have extended the NFO period for their fixed maturity plans (FMPs) in the last few days.
• Some funds have started charging an exit load on their debt schemes to discourage redemptions.

While redemptions were not as big as feared, the launch of new FMPs has drastically come down in October and the money collected through New Fund Offers stood at Rs 6,778 crore, compared to Rs 23,173 crore in September. This has hurt the industry hard. NFOs have, for all practical purposes, served to roll over monies from maturing schemes.

The following funds find their place in the NFO Nest in November, 2008.

UTI Wealth Builder Fund Series II
Opens : 21 Oct, 2008 Closes : 19 Nov, 2008

The ongoing global economic and stock market turmoil has fewer investors asking whether or not they should invest in gold. The relevant question is increasingly – how can we invest in gold? Besides buying actual gold bars, in India we have two options. One is to invest in mutual funds that buy the stocks of mining companies abroad or invest in Gold Exchange Traded Funds (ETFs).

Now there is one more interesting option thrown up – a mutual fund that invests in gold, equity as well as debt. UTI Wealth Builder Fund-Series II will invest in a diversified portfolio of equity and equity related instruments, debt as well as Gold ETFs. The equity allocation will not be restricted to any market capitalisation or sector. It will be tilted towards large caps though and will also employ derivatives to hedge and manage volatility. The exposure to equity can vary from 65% to 100%. However, the exposure to Gold ETFs will be anywhere from 0 to 35%. The same percentage applies for debt and money market instruments. The fund has the following benchmarks: BSE 100 (equity), CRISIL Bond Fund Index (debt), gold price as per SEBI regulations for Gold ETFs (gold).

This combination of equity, debt and gold is an innovative scheme and looking at the asset allocation and large cap tilt, it should be a conservative offering with low volatility. It is mandatory to have a demat account when investing in a Gold ETF. That requirement is eliminated here. Moreover, unlike funds which buy gold mining stocks, this one will directly have exposure to gold via an ETF. A well thought out combination of gold and equity. Since the equity exposure is a minimum of 65%, for tax purposes it will be treated like an equity fund. So investors selling their units after a year will not have to pay any capital gains tax.

UTI Wealth Builder Fund - Series II is the first of its kind in the mutual fund industry to offer an asset allocation which combines traditional as well as non traditional asset class i.e. Equity and Gold. It is important to have an alternative asset in one’s portfolio and to build a portfolio around assets that have low correlation. Gold has proved to be "counter cyclical" or low correlated asset class as compared to equity investments and has generally been considered as a safe haven during times of economic upheavals and volatile equity markets. The investment in Gold ETFs will diversify portfolio risk and reduce overall volatility of returns in a reasonable time frame.

ICICI Pru S.M.A.R.T. Fund – Sr D and G
Opens : 15 Oct, 2008 Closes : 28 Nov, 2008

ICICI Prudential S.M.A.R.T. (Structured Methodology Aiming at Returns over Tenure) series D and G aim at investing in short-term and medium-term debt instruments with fixed and/or floating payouts linked to the equity indices normally maturing in line with the time profile of the schemes (24 months in the case of Series D and 36 months in the case of Series G). (Series D opened on 16 October and will close on 20 November).

DBS Chola Tax Advantage Fund - Series I, DWS Treasury Plus Fund, Edelweiss Equity Linked Savings Scheme, Edelweiss Arbitrage Fund, Tata Infrastructure Tax Saving Fund, Religare Ageon Business Leaders Fund and Lotus India Active Nifty Fifty Fund are expected to be launched in the coming months.

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