Monday, December 21, 2009

NFO Nest
(December 2009)

From a drizzle to a downpour?

After a prolonged lull, there are quite a few NFOs which have opened up. Investors are not getting as excited about NFOs as they used to be in the latter half of 2007 or early 2008. Moreover, the economics of selling funds has changed with the abolition of entry load. This apart, there has also been a marked change resulting in the disappearance of plain vanilla NFOs (which pretend to be different) by the existing fund houses. Investors get excited only when the markets go up. This time around, the indifference to existing funds sales or NFOs can be attributed to the fact that the market spiked in a rather short period. Most investors are still in the process of making their exit (as confirmed by the AMFI data) because a large number of first time investors entered in 2007 and early 2008 and are now breaking even. Net flows into equity mutual funds have actually been negative for the entire industry but when viewed from a customer perspective, mutual funds are now the cheapest way to grow wealth using markets - both equity and debt. So, interest is coming back, but a tad slowly. A couple of months ago, investors felt that the markets had run-up quite a bit. In the current range bound environment they seem a lot more positive.

It has started raining NFOs …Two out of the three funds that figure in the NFO Nest in December, 2009 are PSU Funds! Fidelity Value Fund and DSP Blackrock World Mining Fund do not figure in the December 2009 NFO Nest since they closed a few days ago.

Sundaram BNP Paribas PSU Opportunities Fund

Opens: November 25, 2009
Closes: December 24, 2009

Stock markets have been upbeat over government disinvestment in public sector companies ever since the UPA government returned to power without the support from the Left parties. As more PSUs head for a listing, there is an expansion of investment opportunities. Since initial public offerings offer a different kind of opportunity, almost the entire investor fraternity is keen to get a piece of this action. Sundaram BNP Paribas mutual fund seeks to offer an entry pass to this PSU party by launching the thematic offering — Sundaram BNP Paribas PSU Opportunities Fund. The fund aims to capture the wealth creation opportunities over the long term presented by public sector undertakings (PSU) that account for almost 30 per cent of the market capitalisation on the National Stock Exchange. The fund has identified wealth creation triggers in the form of disinvestment process, growth, valuation re-rating, and high-dividend payouts. The fund will invest at least 65 per cent of assets in the equity and equity-related securities of companies in the targeted theme. The fund manager can consider investing beyond the theme universe to the extent of 35 per cent of the assets. At any given moment, the overseas investments are capped to the extent of 35 per cent of the assets. Of course, such securities must be a part of the target theme. Funds can seek investments in debt and other fixed income instruments to the extent of 35 per cent of the total assets. CNX PSE Index is the benchmark for the scheme.

PSUs are focused on the high-growth sectors of the economy, have been resilient in tough periods with robust financials, and have demonstrated ability to create shareholder value. The market cap of the PSU universe has risen from about Rs 90,000 crore to Rs 15,10,254 crore in this decade as PSU stocks outpaced the broad markets as well as private sector players. PSUs trade at a discount of about 25 per cent to the broad market, and 40% discount to the private sector. If there is a 50 per cent re-rating of PE multiples, potential increase in value of listed PSUs could increase by about $58 billion. But there is a flip side to investing in public sector companies. They will be affected by the government policies on PSUs. The stable Government at the centre and the imminent third wave of disinvestment augurs well for the fund. As a thematic fund, there will be concentration risk compared to a diversified fund. But the fund will invest in the companies falling under the public sector, which straddle segments as diverse as banking, insurance, oil, power, mining, defense, engineering, and transportation, infrastructure and services. All said and done, it is interesting, differentiated, and there is a quality universe. A fund for the long haul…

Baroda Pioneer PSU Bond Fund

Opens: December 7, 2009
Closes: December 21, 2009

Baroda Pioneer Mutual Fund has launched a new open ended debt scheme named Baroda Pioneer PSU Bond Fund. The portfolio of the fund will predominantly consist of PSU bonds and government securities of varying yields and maturities. The fund will invest upto 65 per cent of the assets in debt or debt related instruments issued by PSUs and public financial institutions. The balance 35 per cent will be invested in treasury bills or government securities. Liquidity will be managed through investments in PSU Bank CDs. The core portfolio will consist of papers having a maturity of two to three years. The fund has been benchmarked against the CRISIL Bond Fund Index.

The scheme has been rated mfAAA by ICRA - the highest-credit quality long-term rating assigned by ICRA to debt funds. The portfolio aims to generate alpha through active duration management. The scheme will look to ride on the yield curve as well as benefit from high accrual income in the event of a change in the interest rate scenario. The fund will look to deliver competitive return on investments by designing a portfolio that will track interest rate movements with low credit risk due to its exposure to PSU bonds. However, a wrong call on the macro picture can jeopardise the returns offered by the fund. PSUs have strong fundamentals and sustainability required to maintain long-term growth. By focusing on high grade debt instruments issued by the government and state-owned companies operating in sectors such as capital goods, oil and gas, power, financial services, etc, the fund intends to bring down the credit risk. This will ensure return of capital in a world that teeters on the threshold of a recovery.

Axis Tax Saver Fund

Opens: December 17, 2009
Closes: December 21, 2009

Axis Mutual Fund has launched a new scheme Axis Tax Saver Fund, an open ended equity linked savings scheme. The scheme will allocate 80% to 100% of assets in equity and equity related instruments with high risk profile. On the other side, it will invest upto 20% of assets in debt and money market instruments with low to medium risk profile. Debts include investment in securitized debt upto 20% of the net assets of the scheme. The scheme will not invest in foreign securitized debt. Benchmark Index for the scheme is BSE 200.

Birla Sunlife Capital Protection-oriented Fund, Principal Precious Metal Fund, Reliance Liquid Exchange Traded Fund, Sundaram BNP Paribas Capital Protection-oriented Fund, Shinsei Government Securities Fund, Tata Gold Fund, Tata Gilt Mid Term Fund, Religare Gold Monthly Income Fund, Optimix Multi Cap Fund, Axis Arbitrage Fund, and Axis Offshore Fund are expected to be launched in the coming months.

No comments: