NFO NEST
January 2011

Race against time!

Mutual fund unit sales are sliding due to a variety of factors, including many regulatory developments in the last few years. Equity mutual funds, through 24 NFOs, collected a mere Rs 3,000 crore in 2010, down by over 57% from 2009 and lowest in four years. 2007 witnessed 64 equity NFOs collecting Rs 39,327 crore; 48 equity fund offerings in 2008 collected Rs 12,722 crore, and 33 NFOs in 2009 collected Rs 7,284 crore. To fast-track plans, SEBI directed mutual funds in July 2010 to reduce their NFO subscription period from 30 days to 15. Moreover, unit allotment, refunds, and statements of account should be posted to investors within five business days from the closure of the NFO. Fund houses are finding it difficult to complete the unit allotment process in five days. This is more so in the case of applications coming from far-flung areas. Most funds have stopped selling new schemes in smaller towns and stick to only cities and just a few top distributors who get wealthy clients. Distributors are not willing to sell new schemes at commissions as low as 50 to 70 basis points (a basis point is 0.01 percentage point). Since the abolition of entry loads, there is hardly any financial incentive for a distributor to sell NFOs. Mutual funds are seeking at least two weeks' time to credit investors with the units in new launches as the industry battles the worst inflows from new schemes in four years.

January 2011 NFONEST is no different… Only two NFOs are on offer.

Birla Sun Life Capital Protection Oriented Fund – Series 3 & Series 4
Opens: January 10, 2011
Closes: January 24, 2011

Birla Sun Life Mutual Fund has launched two new funds - Birla Sun Life Capital Protection Oriented Fund - Series 3 and Series 4. Both the funds will be closed ended capital protection oriented funds with the duration of 36 months from the date of allotment of units. A comparatively large portion of your money will be invested in high quality bonds while the remaining portion (up to 20%) will be invested in equity markets for better returns on the total investment. The investment objective of the funds is to provide capital appreciation linked to equity market with downside protection at the end of tenure. Yet, the funds give you tax efficient returns (compared to regular FDs) by way of investing a small portion of the corpus in equity and equity related instruments in secondary markets. You can also take advantage of the triple indexation benefits with these funds as there is no TDS applicable here! This Capital Protection Oriented Mutual Fund comes with the rating of mfAAA (so) by ICRA which means that there is a highest degree of certainty for the payment on the face value of the fund. These funds are just oriented towards protection of your capital and do not guarantee any returns and hence investing in these funds is as risky as investing in any other mutual funds available. The funds will be benchmarked against Crisil Balanced Fund index. The funds will be managed by Mr. Satyabrata Mohanty.

MOST Shares M 100 ETF
Opens: January 12, 2011
Closes: January 24, 2011

MOST Shares M 100 ETF is the first exchange traded fund in India, which tracks the performance of the midcap segment of the broader stock market. The ETF seeks to achieve its goal by investing in securities constituting the CNX Midcap Index in the same proportion as in the Index. The ETF will invest at least 95% of its total assets in the securities comprising the underlying Index. The ETF may also invest in debt and money market instruments to meet the liquidity and expense requirements. The ETF seeks investment returns that correspond to the performance of the CNX Midcap Index, subject to tracking error (less when compared to index funds). MOSt Shares M100 ETF will be listed on the NSE. The Benchmark index for the ETF will be CNX Midcap Index. The fund manager of the scheme is Mr. Rajnish Rastogi.

Baroda Pioneer Banking and Financial Services Fund, Peerless Infrastructure Fund, and ICICI Prudential Multiple Yield Fund - Plan A to F are expected to be launched in the coming months.