Monday, March 15, 2010

March 2010

Jumbo NFOs go the dino(saur) way…

Are the days of mega NFOs from mutual fund houses over? A comatose distribution network, rendered ineffective after SEBI abolished entry load on fresh investments in mutual funds in August 2009, has played a paramount part in pushing prodigious NFOs into oblivion. Though it is a bit premature to write the obituary of new offerings from funds, the days of gargantuan NFOs are a thing of the past.

IDFC Capital Protection Oriented Fund - Series I – Growth

Opens: February 24, 2010
Closes: March 24, 2010

The twelfth capital protection-oriented fund in the Indian mutual fund industry, IDFC Capital Protection Oriented Fund Series-1 is a three-year closed-end fund. The fund initially intends to deploy at least 84 per cent of the funds collected during the NFO period in debt securities and money market instruments with a view to protecting the principal capital at the time of maturity of the plan. The fund allows investment of up to 16% in equity and equity related instruments. The strategy ensures that you get your capital back irrespective of the performance of equity. This way the fund aims to offer you an opportunity to invest in equities without risking your entire investment. The fund has been benchmarked against CRISIL MIP Blended Index. The fund would be managed by Ashwin Patni who jointly manages IDFC Arbitrage fund and IDFC Arbitrage Plus Fund.

On the taxation aspect, the fund is a sure shot winner. The fund scores over a fixed deposit as the returns earned are taxed at lower of 10.3% without indexation, or 20.6% with indexation like a debt mutual fund, whereas the fixed deposit returns are taxed at 30.9%. Moreover, there is no TDS for resident Indians, unlike other traditional deposits. The only difference between a fixed deposit and such a fund is that returns on fixed deposit are known to investors at the time of investing. As far as returns are concerned, while the fixed income securities can give you an average return of about 7-7.5 per cent, the possible return on equity portion for a 3-year period is left to chance. In the past three years, narrow or broader indices (such as BSE 500, Sensex or Nifty) have given 11-13 per cent annualised returns. There could be wide variance in terms of returns. For the past 12 months, capital protection oriented schemes have returned a maximum 23 per cent and a minimum 7 per cent. So fund selection is absolutely essential. The typical fee structure of capital protection-oriented funds is high at 2.25 per cent of assets under management. However, these funds have no entry or exit loads.

The aim of this fund is to provide an attractive investment solution to the conservative investors in India who have over 46 lakh crores invested in Fixed Deposits. This fund offers investors twin benefits of making their money grow in line with inflation while ensuring that their capital remains protected. Clearly, the target is traditional fixed income investors with safety on their mind and with a time horizon of two to three years.

IDFC Hybrid Portfolio Fund - Series I

Opens: March 1, 2010
Closes: March 24, 2010

IDFC Mutual Fund has launched IDFC Hybrid Portfolio Fund - Series I, a closed-end debt scheme. The scheme shall mature on September 28, 2011. The scheme endeavors to generate income by investing in high quality fixed income securities as the primary objective and generate capital appreciation by investing in equity and equity related instruments as a secondary objective. The scheme would allocate 50% to 93% of assets in debt instruments and money market instruments with high risk profile. It would further allocate 7% to 50% of assets in equity and equity related instruments with medium risk profile. Investment in securitized debt and foreign securities would be up to 50% of net assets of the scheme. Investments in derivatives would be up to 100% of the net assets of the scheme. The Scheme's performance will be benchmarked against CRISIL MIP Blended Index. Ashwin Patni will be the fund manager for the scheme.

MOSt Shares M50 - Motilal Oswal ETF, DWS Gold Advantage Fund, Tata PSU Equity Fund, Axis Triple Advantage Fund, HSBC Brazil Equity Fund, Quantum Gold Fund - Exchange Traded Fund, Quantum Gold Savings Fund, DWS Gold Advantage Fund , Taurus Sector Rotation Fund, and Taurus Rural India Opportunities Fund are expected to be launched in the coming months.

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