Monday, February 14, 2011

GEM GAZE

February 2011

A single-stop solution…

Fund of Funds are a good option for investors looking for expert handholding to invest based on asset allocation. Most of the funds are built around risk profiles – conservative, moderate and aggressive — in which most of the retail investors fit in. It is the risk profile of the investor and the life stage that the investor is in that will decide which of these options he or she should choose. This makes the investment process much easier for investors and the inbuilt rebalancing feature helps in maintaining the target asset allocation, which could go awry due to market. The best part of investing in an asset allocation fund is that you will get access to a basket of funds with different investment styles that will invest according to your asset allocation plan. It saves the time needed for investing in multiple schemes and tracking them. A life stage fund can provide investors a single-stop solution for their needs.

All the four FoFs that found a place in the 2010 GEM GAZE have retained their GEM status in 2011.

FT India Life stage Fund of Funds Gem

Simplifying life in stages

To make life simpler, Franklin Templeton AMC has plans based on life stages, which help investors to decide on a plan that will suit his age profile. These include FT India Life Stage FoF 20s, FT India Life Stage FoF 30s, FT India Life Stage FoF 40s, FT India Life Stage FoF 50s Plus, and FT India Life Stage FoF 50s Floating Rate. All these are plans of a single fund that has assets of around Rs 230 crore. The AUM of each plan is Rs 13.92 crore, Rs 8.2 crore, Rs 13.77 crore, Rs 19.51 crore, and Rs 167.82 crore respectively. The top three sectors in the portfolio are finance, energy, and engineering, with engineering being replaced by metals in the case of the last two plans. Allocation to large caps in the various plans range from a low of 65% to a high of nearly 80%. The allocation to equity tapers from 82% in the first plan to a measly 20% in the last plan. The one-year returns of the plans are 10.72%, 9.46%, 8.36%, 6.9, and 6.36% respectively. They have all surpassed their respective category averages. While the expense ratio for all the plans is the same at 0.75%, the portfolio turnover ratio is 8.01%, 8.56%, 6.24%, 15.43%, and 22.5% respectively.

ICICI Prudential Advisor Series Gem

Priced possession

ICICI Prudential Mutual Fund offers FoF through five plans: ICICI Prudential Advisor–Very Aggressive, ICICI Prudential Advisor –Aggressive, ICICI Prudential Advisor–Moderate, ICICI Prudential Advisor–Cautious, and ICICI Prudential Advisor–Very Cautious. Based on an investor’s age, these funds provide an option to put money in schemes with different asset allocations, which is essential for life-cycle investing. A person in his 20s can go for an aggressive or a very aggressive fund and someone in the 50s can go for a conservative or a very conservative fund. However, the funds do not offer automatic switching between plans. Switching is treated as redemption and has tax implications. The choice rests with the customer. The asset allocation pattern, benchmark indices, and the exit load structure have undergone a complete overhaul since April 2010. The AUM of Aggressive, Moderate, and Cautious Plans is Rs 7.6 crore, Rs 6.28 crore, and Rs 3.21 crore respectively. The top three sectors in the portfolio are finance, energy, and metals, with metals being replaced by technology in the case of the last two plans. Allocation to large caps hovers around 70% in all the plans. The allocation to equity is 47%, 37%, and 17% respectively. The one-year returns of the plans are 10.42%, 7.01%, and 6.06% respectively. They have all surpassed their respective category averages. While the expense ratio for all the plans is the same at 0.75%, the portfolio turnover ratio is very high at 296%, 340%, and 381% respectively.

Birla Asset Allocation Plan Gem

In search of value

Birla Asset Allocation Plan offers three plans – Aggressive, Moderate, and Cautious Plans. The AUM of Aggressive, Moderate, and Cautious Plans is Rs 15.41crore, Rs 13.5 crore, and Rs 10.47 crore respectively. The top three sectors in the portfolio are finance, and technology with healthcare and energy being the other two prominent sectors. Allocation to large caps hovers around 50%. The allocation to equity is 71%, 48%, and 18% respectively. The one-year returns of the plans are 7.4%, 6.44%, and 5.69% respectively. All but the Aggressive Plan have surpassed their respective category averages. The expense ratio for all the plans is low at 0.35%.

FT India Dynamic PE Ratio Fund of Funds Gem

Dynamic defence

The AUM of the fund is an impressive Rs 1308.3 crore. The top three sectors in the portfolio are energy, finance, and engineering. Allocation to large caps is high at 88%. The allocation to equity at present is moderate at 41%. More than being a FoF, the fund is more of an asset allocation fund. It switches between equity and debt depending on Nifty’s price-earnings (P-E) multiple. Higher the Nifty’s P-E, lower is its allocation to equity and vice-versa. Such deliberated asset moves have helped the fund contain downsides better than pure-play equity funds and deliver better than debt funds during protracted rallies. The fund's performance during periods of market correction merits special attention. In the bear market of 2008, its NAV fell by just about 26%, against the 56% decline averaged by diversified equity funds. The one-year return of the fund is 8.27% as against the category average of 6.76%. While the expense ratio is at 0.75%, the portfolio turnover ratio is 41.97%.

No comments: