NFO NEST
January 2010

The NFO facelift?

Every bull run inundates the market with NFOs. The pace of NFOs has, no doubt, picked up but the mind-boggling four-digit collection figures are passé. Driving on positive investor sentiments have proved futile in effecting a NFO facelift.

Kotak Nifty ETF
Opens: January 11, 2010
Closes: January 19, 2010

Kotak Mahindra Asset Management Company has launched the Kotak Nifty ETF, an exchange traded fund focusing on investing in 50 stocks that comprise the S&P CNX Nifty. The Fund will mainly invest in stocks forming part of the underlying index in the same ratio. Each unit of the Kotak Nifty ETF will be approximately equal to one-tenth of the value of the S&P CNX Nifty. The open ended ETF aims to provide returns before expenses that closely correspond to the total returns of the S&P CNX Nifty, subject to tracking errors. Kotak Nifty ETF will be listed and can be traded on the National Stock Exchange (NSE). The Kotak Nifty ETF offers investors exposure to Nifty with a single order. It is like any other listed share enabling intra day buying and selling. Moreover, with the underlying value being similar to Nifty futures, the fund provides hedging and arbitrage possibilities.

Kotak Mahindra Asset Management Company currently operates a Gold ETF, a PSU Bank ETF and a SENSEX ETF. The addition of Kotak Nifty ETF further strengthens Kotak’s ETF product suite. Kotak Nifty ETF caters to each and every class of investor - from long term investors to arbitrageurs, institutions, and FIIs while offering the advantages of portfolio diversification, low cost, trading flexibility, and minimal tracking error.

IDFC Asset Allocation Fund of Funds
Opens: January 4, 2010
Closes: January 25, 2010

IDFC Mutual Fund has launched IDFC Asset Allocation Fund of Funds, an open ended fund of funds scheme. The primary objective of the scheme is to generate capital appreciation through investment in different mutual fund schemes, primarily local funds, based on a defined asset allocation model. The scheme offers 3 plans – Conservative Asset Allocation Plan (Conservative AA Plan), Moderate Asset Allocation Plan (Moderate AA Plan), and Aggressive Asset Allocation Plan (Aggressive AA Plan).

Conservative Asset Allocation Plan will invest 10% - 15% of its asset in equity funds with low to medium risk profile, 45% - 50% in debt funds & liquid fund with low to medium risk profile. It would allocate up to 15% of assets in money market securities with low risk profile.

Moderate Asset Allocation Plan will invest 25% - 30% of assets in equity funds with medium risk profile, 60% - 70% in debt funds with medium to high risk profile, up to 5% in liquid fund and 5% - 10% in Alternative with low to medium risk profile. It would invest up to 15% in money market securities with low risk profile.

Aggressive Asset Allocation Plan will invest 45% - 50% of assets in equity funds with high risk profile, 35% - 45% in debt funds with medium risk profile, up to 5% in liquid fund and 10% - 15% in Alternative with low to medium risk profile. It would invest up to 15% of assets in money market securities with low risk profile.

The benchmark index for the scheme will be CRISIL MIP Blended Index for the Conservative Asset Allocation plan and Moderate Asset Allocation plan and CRISIL Balanced Index for the Aggressive Asset Allocation plan.

Fidelity Global Real Assets Fund
Opens: January 11, 2010
Closes: January 29, 2010

Fidelity Mutual Fund has launched the Fidelity Global Real Assets Fund, an open-ended fund of funds (FoF) scheme that combines thematic thinking and a bottom-up stock idea selection. The fund aims to generate growth from a portfolio invested in Fidelity Funds – Global Real Assets Securities Fund. It is an offshore fund launched by Fidelity Funds (an open ended investment company incorporated in Luxembourg) and similar to an Indian mutual fund scheme.

The Global Real Assets Securities Fund invests in equity securities all around the world leading to a diversified exposure spanning commodities, property, industrials, utilities, energy, materials and infrastructure. Since launch in September 2009, the Fidelity Fund - Global Real Asset Securities Fund has outperformed its benchmark by 1.8%. The fund returned 16.10% while its custom benchmark had returns of 14.3%. The Fund was seeded by an internal Fidelity pilot fund, which since inception in January 2009 has delivered 86.2% returns. When compared to the BSE Sensex, the Fidelity Funds - Global Real Asset Securities Fund has outperformed by 3.2% since inception in September 2009, while the pilot fund has outperformed the Sensex by 9.9% over a one year period. (All returns figures are as at 31.12.09.)

The fund is looking to invest up to 100 per cent in shares and units of the underlying scheme, (which itself would invest 70 per cent in global equity securities), while it would also look to invest up to 20 per cent in money market instruments and liquid, or cash, schemes of mutual funds registered with market regulator Securities and Exchange Board of India (SEBI).

The fund would be benchmarked against the following indices – MSCI ACWI Industrials, MSCI ACWI Real Estate, MSCI ACWI Utilities, MSCI Materials and MSCI Energy. The weights assigned to each individual index while calculating the custom benchmark is 20 per cent, 20 per cent, 10 per cent, 20 per cent and 30 per cent respectively. Indian investors have always had a soft spot for physical assets, like gold and real estate. The Fidelity Global Real Assets Fund brings the option of adding a whole range of physical assets through the convenience of a diversified equity fund. At a retail level it is a unique, first-of-its-kind fund that offers an alternate asset play with all the liquidity benefits of a mutual fund.

IDFC Monthly Income Plan
Opens: January 11, 2010
Closes: February 9, 2010

IDFC mutual fund has launched a monthly income plan, an open-ended fund of funds that aims to invest in units of debt mutual funds (income fund and liquid fund) and units of equity mutual funds. The investments in debt schemes are expected to generate regular returns while the investments in equity funds will bring in long-term capital appreciation. The fund manager will invest 65-100% of the money in units of debt mutual fund scheme. He will park 0-25% of the assets in the units of equity mutual fund schemes. The scheme’s investment mandate also allows the fund manager to invest 5-10% of the money in the money market instruments.

The scheme, by investing in a mix of debt and equity mutual fund schemes, differs from a traditional mutual fund MIP, which invests in a judicious mix of debt instruments and equity instruments. As an investment process, the fund manager will shortlist a universe of schemes, both in equity and debt taking into account quality of the sponsors, assets under management, performance of the scheme and investment objective. The fund manager will take a call on asset allocation, depending on his views on the market and risk-return consideration. Asset allocation will be reviewed on a monthly basis. The scheme is benchmarked against CRISIL MIP blended index. The fund-expense ratio, being a fund of funds, is capped at 0.75%. Here, a point to note is that these expenses are over and above the expenses charged by the schemes in which the fund manager intends to invest. The scheme sounds good for those who are looking for a solution that allows the investor to combine the benefits of assets allocation and manager diversification into a single product. The scheme may offer investors healthy risk-adjusted returns.

Peerless Liquid Fund, Peerless Short Term Fund, Peerless Ultra Short Term Fund, Peerless Mutual Fund Savings Fund, Axis Income Suraksha Fund, DSP Black Rock Focus 25 Fund, Kotak Credit Opportunities Fund, JP Morgan India Short Term Income Fund, Shinsei Tax Saver Fund, Reliance Hybrid Saving Fund, Benchmark Short Term Fund, and Benchmark Gold Fund of Funds are expected to be launched in the coming months.