In an innovation of sorts, IDFC Mutual Fund has launched GDP Growth Fund, a scheme that provides investors the opportunity to invest in the India growth story by mirroring investments in thevarious components of growth.Thus, the fund would endeavour to follow economic growth of the country by investing its corpus in different gross domestic products (GDP), such as industry, services and agriculture, in the same proportion as their contribution to overall GDP.Accordingly, going by the present trend, 8 per cent of the total corpus would be allocated to stocks of companies having business related to agriculture, 71 per cent in services and the remaining 26 per cent in industries. IDFC has pinned its hopes on India growing at a higher pace compared with other countries across the globe.The fund, however, comes at a time when the economic growth of the country has slowed with GDP projections being successively lowered to a little over 7 per cent for the present fiscal year by the Union government. The new fund offer period was open for subscription from January 28 to February 26, 2009. The face value of new issue is Rs 10 per unit.Mutual fund industry players say that IDFC Mutual Fund might not have an easy ride with the fund, especially at this point.“It is not easy to mirror the GDP as the new scheme of IDFC fund envisages. There are not many great performers in the agriculture sector and getting right stocks in optimum proportion would not be easy. Also, not all the sectors of the economy would perform in a similar manner at any given point and hence the fund has to remain invested in a particular sector in a particular proportion and this is a negative of the new fund,” Ashish Kapur, chief executive officer, Invest Shoppe, a broker of mutual fund products, said.“There are other mutual funds that offer schemes that have similar features. Under the present circumstances, investors might be wary of betting on a new fund rather than investing in tried and tested one,” a head of a mutual fund house, who did not wish to be named, said.The new fund offers both growth and dividend options. The minimum investment amount is Rs 5,000 and in multiples Re 1 thereafter. The fund will charge an entry load of 2.25 per cent for the investment amount less than Rs 5 crore.
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IDFC has recently launched a New Fund Offer named IDFC India GDP Growth Fund.
The IDFC India GDP Growth Fund seeks to invest the assets in the sectors representing the three components of India's GDP viz., Agriculture, Services and Industry. The allocation to these levels of GDP will be in the same proportion as their contribution to the overall India's GDP, and will normally be revised on a semi-annual basis, or whenever the GDPgrowth estimates are revised.
COMMENTS AND RECOMMENDATION :
The Fund is innovative and aims to capture the Growth in India's GDP. The Fund would act as a Good Diversified Fund as it will be investing in Stocks in Sectors and Industries across market captilisation. The Fund Manager, Mr.Ajay Bodke has had a good expertise in managing Funds and has performed reasonably well. The Fund may a Good Pick for Long Term Investors.
The Fact that India's economy is relative insulated from the Global meltdown and that India is better positioned better than most countries makes Indian Markets attractive and India should better GDP numbers going forward. This in turn will help the Fund give good returns.
The Fund, however, may not find it easy to mirror the GDP. Besides, there are not many great performers in the agriculture sector and getting right stocks in optimum proportion would not be very easy. Also, not all the sectors of the economy would perform in a similar manner at any given point and hence the fund has to remain invested in a particular sector in a particular proportion and this is a negative of the new fund.
IN A NUTSHELL, THERE ARE MANY TOP PERFORMING FUNDS WHICH OFFER SIMILAR FEATURES AND HAVE A TRACK RECORD TO BOAST OF. RISK AVERSE INVESTORS WOULD BE BETTER OFF TO WAIT FOR THE FUNDS PERFORMANCE TO COME OUT AND THEN TAKE A CALL. OTHERS CAN TAKE THE SIP ROUTE AND INVEST IN THE FUND.
Best of luck,
Srikanth Shankar Matrubai
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