ING launches first multi-manager Global Commodity Equity Fund

Laying its faith on commodity companies worldwide, ING Investment Management India on Monday launched ING Optimix Global Commodities Fund, India’s first multi-manager global commodity equity fund. 

The primary objective of the scheme is to achieve long-term capital growth by investing primarily in units of global commodity oriented mutual funds. The scheme opens on July 29 and closes on August 25. 

The scheme carries an entry load of 2.50 per cent for applications below Rs 5 crore and nil for applications of Rs 5 crore and above. There is no exit load either. 

Explaining the rationale behind the new launch, Vineet Vohra, MD and CEO, ING Investment Management India, said, “In the context of high inflation and falling equities in the stock market, commodities do well in helping one to diversify his portfolio. Even institutional investors are allocating funds more and more into commodities.” 

Vohra is eager in taking a cue from the institutional investors and wants retail investors to invest in commodity related equities especially in fall equity markets and high inflation. 

“Commodities do well during high inflation,” added Vohra. 

According to him, “Optimix is not a commodity fund. We are going to invest in commodity equities globally.” 

Under the multi-manager concept, the fund will invest in the global commodity funds managed by some world renowned global asset management houses like Credit Suisse, First State Investment, JP Morgan, Martin Currie, Societe Generale and Investec. 

The fund house is targeting a corpus of Rs 20,000 crore in the new fund offer. Out of the total corpus 65-100 per cent will be invested in global mutual funds which invest in commodity related securies, 0-25 per cent in debt funds, liquid funds, money market funds and 0-10 jper cent in money market securities. 

Interestingly, ING OptiMix fund shall not invest in the single schemes of ING Mutual Fund. Further, it shall not invest in those in overseas mutual fund which have an exposure to Indian securities market through participatory notes. The scheme is large cap biased with 63 per cent of the portfolio. 

“Global commodities offer diversification as they have a low correlation with other asset classes in addition to a wide geographical asset ownership. Commodity exposure offers a strong hedge against inflation making it a relevant asset class especially in the current scenario,” said Arvind Bansal, chief investment officer – Manager Investments, ING Investment Management India. He feels exposure to an alternative asset class like commodities would provide better risk adjusted returns to an investors’ overall portfolio. 

Vohara, who feels commodity equities can deliver better returns than commodities, said, “for investors, a multi-manager solution offers simplicity, efficient diversification of risk and the potential for superior, consistent performance.” 

The fund scheme is benchmarked to Dow Jones World Basic Materials Index (40 per cent), Dow Jones World Oil and Gas Index (40 per cent) and MSCI AC World in INR terms (20 per cent).

Principal Global Opportunities Fund/ Infrastructure and services Industries Fund

Principal PNB Asset Management Company has proposed amendments in the offer documents of Principal Global Opportunities Fund. The fund will be allocating at least 85 per cent of its assets into overseas mutual fund and the rest in money market securities. It also proposes to charge annual recurring expenses up to 0.75 per cent.

Principal PNB Asset Management Company has decided to restructure and re-strategise Principal Infrastructure and Services Industries Fund by changing its investment objective; asset allocation and name of the fund to Principal Services Industries Fund. These proposed changes will be in effect from August 26.

Sahara MF launches Banking & Financial Services Fund

Sahara Mutual Fund today announced the launch of its new scheme �Sahara Banking & Financial Services Fund.

The new fund offer (NFO) opens on July 28, 2008 and would close for initial subscription on August 26, 2008. 

During the NFO period, there is no exit load. Under the scheme one can opt for Dividend Option, (including dividend re-investment option) or Growth Option. Minimum application amount is Rs 5,000.

Announcing the launch, Naresh Kumar Garg, Chief Executive Officer, Sahara Mutual Fund mentioned, The Indian economy is well on its path to become one of the largest economies in the world. The investments in the real economy have been growing at fast pace and the sound Banking and Financial system of the country is proving to be the catalyst in forging the high GDP growth rates for India.

Sahara Banking & Financial Services Fund is an open - ended sectoral growth fund with the objective to generate long-term capital appreciation through investment in equity and equity related securities of companies that are in Banking and Financial Services segments. At least 75% of the total assets will be invested in equity and equity related securities and upto a maximum 25% of the total assets might be invested in debt and money market instruments.

MF NAVs decline sharply as mkts plunge

Equity diversified NAVs ended lower with negative advance:decline ratio of 8:204 as markets sink deep in red on the back of continued profit booking and weak global cues. Markets ignored stability in crude price and steady inflation numbers. The Sensex was down 502.07 points or 3.40% at 14274.94. Nifty was down 121.70 points or 2.74% at 4311.85. 

On the sectoral front, auto and banking funds declined. FMCG funds ended mixed. Pharma funds closed mixed with negative bias while technology funds mixed with positive bias.

However, long term debt funds advanced; advance:decline ratio stood at 47:32.
Equity diversified NAVs end lower 
Auto and banking funds decline 
FMCG funds end mixed 
Pharma funds close mixed with negative bias 
Technology funds end mixed with positive bias 
Long term debt funds advance
Among the equity diversified funds, the top gainers were UTI Mid Cap Fund (G) up 0.44%, Sundaram BNP Paribas Select Small Cap Fund (G) up 0.34% and Birla Sun Life Dividend Yield Plus (G) up 0.21%. The top losers were UTI Index Select Equity Fund (G) down 2.86%, Franklin India Opportunities Fund (G) down 3.00% and ICICI Pru Growth Plan (G) down 2.86%.  

Among the tax saving funds, the only gainer was Taurus Libra Tax Shield (G) up 0.25%. The top losers were LIC MF Tax Plan (G) down 2.78%, Franklin India Tax Shield (G) down 2.53% and Birla Sun Life Tax Relief 96 (G) down 2.78%. 

Among the sector funds, the top gainers were JM Healthcare Sector Fund (G) up 0.42%, Franklin FMCG Fund (G) up 0.42% and SBI Magnum Pharma Fund (G) up 0.17%. The top losers were Lotus India Banking Fund - Retail Plan (G) down 4.80%, UTI Banking Sector Fund (G) down 3.32% and UTI Energy Fund (G) down 3.03%.

Among the balanced funds, the only gainer was BOB Children Fund - Gift Plan up 0.01%. The top losers were Kotak Dynamic Asset Allocation (G) down 3.10%, FT India Balanced Fund (G) down 2.28% and Sundaram BNP Paribas Balanced Fund (G) 2.18%.

MF good for long term

Always have realistic expectations about investment performance. Information available/quoted in various reviews is past performance. Remember that the past performances of the instruments may not be repeatable. 

Investors should look for medium to long-term time horizon for investments in mutual funds (especially equity mutual funds). Investors should keep in mind that short-term gains from mutual funds attract short-term capital gains tax while the long-term gains are tax-free. Also, if you are switching from one fund to another, it involves transaction costs in terms of entry / exit loads. Investors should not look at mutual fund investments for the short term. Consider the fees/loads and taxes applicable on the investment. 

Equity mutual funds invest in the stock markets, and statistically, it is proven that equities provide better results than any other investment instrument over the long term. But stock markets are volatile by nature and are influenced by many events and news inflows (domestic as well international). Therefore, it is advisable for investors to look at medium to long term (more than one year) timeframes while investing in mutual funds. This is because time provides a cushion to absorb all the short-term volatility and helps your investments grow due to market fundamentals. 

Investing in systematic investment plans (SIP) of mutual funds is a good way to begin as it helps in planning your cash outflow well, averaging the entry price in the market, and you get the benefit of timing the market to a certain extent.

Making mutual funds to fund your investment

Mutual funds have put up a strong show in the backdrop of the bull run witnessed in the equity markets in the last five years. 

Funds such as Reliance MF, UTI, HDFC, ICICI Prudential, Birla Sun Life and SBI MF are now boasting of a corpus that easily exceeds the size of the whole industry till a few years ago.

With more transparency in their functioning and stricter regulatory control and the tax concessions that have been extended by the Government to investments in/dividend from mutual fund schemes, the total assets under management of the mutual funds as on June 30, 2008, had grown to Rs 5.64-lakh crore (Source: AMFI). 

Investment in mutual funds has become a viable option for those who are willing to bear a little risk to make a far higher inflation/tax-adjusted return compared to fixed deposits.

Long-term appreciation 

While the growth option of mutual funds would suit those who want long-term appreciation of investment, the dividend option is a boon to those who look for periodic payments.

The diversified equity schemes of the established mutual funds have become a dependable source of income. 

With some of the funds splitting the dividend payments to twice in a year — to the second or third quarter and again to the last quarter of the fiscal — the investors were able to anticipate the cash flow and plan accordingly.

Dividend payout 

An analysis of the fact sheets of prominent mutual funds shows that the NAVs of many of the funds had recovered the fall in value, to the extent of dividend payment made, before the next dividend date or had remained high enough for the funds to make a decent dividend payout again. True, this was possible because of the sustained bull-run the stock markets were witnessing till early 2008. 

But what was significant to note was that for the investors who had taken the SIP route for investment, the dividend earnings would have been consistently on the rise because regular investment would have brought in more units, helped also by the fall in NAV. This benefit of course would not have been achieved if they had redeemed their units.

Take the case of Reliance Growth Fund, which has a mid-cap bias. If one had made an one-time investment of Rs 28,000 ( excluding any load) on July 18, 2003, (cum div NAV Rs 27.96) to be allotted 1,000 units, by end-March 2008, the investor would have earned a cumulative dividend payout of Rs 60,500 on the investment as the fund had made a total dividend payout of Rs 60.50. Even after such a huge payout, value of the original investment itself had nearly doubled as the NAV of the dividend option zoomed to Rs 54.53 as on March 19, 2008, the record date for the last dividend payout.

Reliance Vision Fund, which is a diversified large cap fund, paid a dividend of Rs 19.50/unit in 2003-04 and in the four subsequent financial years, the fund paid each year a dividend of Rs 10.50, Rs 10.50, Rs 10 and Rs 10 per unit, taking the total dividend payout to Rs 60.50/unit in five years, same as its famed sibling.

Franklin Templeton also has upped the dividend payout in the past two years, responding probably to the investor aspirations. 

The fund’s flagship scheme, Franklin India Bluechip Fund had made a total dividend payout of Rs 22.50 during 2003-04 to 2007-08. Franklin India Prima Plus is another fund that has paid a good cumulative dividend of Rs 29 in the past five years. 

Franklin India Taxshield also has been a good dividend payer in the last two years with dividend payout of Rs 8 per unit each year. 

HDFC Mutual Fund’s Equity Fund had paid a total dividend of Rs 24.50 in the past five years. HDFC Prudence Fund, a balanced fund, has been a star performer and the total dividend payout in five years has been Rs 26.50 per unit. Its TaxSaver scheme has paid a cumulative dividend of Rs 28 per unit in the past four years, helped by a higher NAV.

Sundaram BNP Paribas’ Select Focus, which is a ‘pure large cap’ fund, has made a total dividend payment of Rs 27.50 in the past five years. 

Select Midcap is another good dividend payer with a payout of Rs 27 per unit during 2003-04 to 2006-07. Tax Saver Fund which is a five star rated fund by Value Research has made a dividend payout of Rs 26.50 in five years.

Birla Sun Life Equity Fund has given a dividend of Rs 30/unit in five years. But it was its Tax Relief ‘96 scheme that has been a star dividend payer. From its inception in 1996 till March this year, the fund had made a total dividend payout of Rs 211/unit. Of this, Rs 171/unit was paid during 2006-07 and 2007-08. Probably the fund resorted to such high payouts to bring down the NAV so as to attract fresh subscription. This scheme had assets worth Rs 677.72 crore as at the end of May 2008.

Other funds such as ICICI Prudential MF and DSP Merrill Lynch also have funds that have given good dividends in the past few years. DSPML Equity Fund, Top 100 Equity Fund and T.I.G.E.R Fund have provided good dividend payouts. ICICI Prudential’s Infrastructure Fund has been upping the dividend payment and its Tax Plan also has been a good dividend bet.

If one is able to build a corpus of 3,000-5,000 units each, over a period of time, by diligent investing in two or three funds, even a small dividend payout by each of them could turn out to be cumulatively a substantial income. That they are tax free is an added bonus. Part of this income could be used to make fresh investment through the SIP route in the same funds. One could also use the taxable income for investing in tax saving instruments like ELSS or PPF even while using the dividend payment for meeting living expenses.

However, in the near term, it remains to be seen whether the funds would be generous in their dividend payout because of the sustained fall in the value of equities. With the NAV of individual schemes down substantially and the future market trend looking uncertain, the funds may be cautious in their dividend payouts. But, even if the percentage of dividend is pruned, investors, who continue to invest in well-run mutual funds, would still be able to make a decent earning because of the cumulative increase in the number of units held by them. What better time could there be for increasing one’s unit corpus than when the markets are down? With tax concessions thrown in, can the investors ask for more?

JM Financial MF Files An Offer Document

JM Financial Mutual Fund filed an offer document to launch JM Moving Sectors Fund. It is an open-ended equity oriented scheme. The investment objective of the scheme is to provide capital appreciation by taking focused exposure to selective sectors and investing in a reasonable diversified portfolio within those sectors. The scheme offers growth and dividend option.

The scheme will invest 65-100% of its portfolio in equity and equity related instruments including equity derivatives. It may invest up to 35% in money market instruments / debt securities including securitised debt. The Scheme intends to invest in securitized debt up to a maximum limit of 25%.