Many investors now prefer to stay invested in close-ended funds that have just turned open-ended and are mobilising fresh investments from investors. Being mostly mid-cap funds, investors hope these schemes will fare well in the event of a further rally in mid- and small-cap stocks, say fund sellers.
About 10 close-ended schemes have turned open-ended over the past few months; almost all these funds are attracting money from investors. Among a handful of funds, Religare Mid-cap Fund, SBI Infrastructure Fund , Sundaram BNP Paribas Select Small-cap Fund, DSP Blackrock Micro-cap fund and Kotak Emerging Equity are attracting fresh money from retail investors.
According to mutual fund tracker Value Research, ING Optimix Multi-Manager Equity Option Scheme is the only equity scheme that got discontinued at end-of-term. Birla Sunlife Cash Plus Sweep Daily Dividend Fund and Fortis Overnight Institutional Plus Growth Plan are the only debt funds that got discontinued at term end. All the three funds had low asset bases, said fund researchers.
“A good number of these funds are flexicap funds with a mid- or small-cap bias. People invest in these funds on hopes that mid-cap funds will do well in a booming market,” said Hiren Dhakan, associate fund manager, Bonanza Portfolios. Interestingly, close-ended funds have not seen heavy redemptions, unlike most diversified open-ended equity schemes. Asset bases of funds like SBI Infrastructure Fund, HDFC Mid-cap Opportunities Fund , Religare Mid-cap and Kotak Emerging Equity have fallen only in the range of 11-22%. Usually, investors in close-ended funds prefer to redeem (or book profits) their entire investments at end of term.
“Most close-ended funds that got converted recently are 3-year-old schemes; these funds had raised and deployed NFO money when the markets were trading at record levels (in 2007). While these funds have logged decent one-year returns, they have not been able to outperform key indices on a 3-year basis,” said the marketing head of a corporate-promoted fund house, adding, “Investors are staying put in these funds as they don’t want to redeem their investments (of three years) at a loss.”
While existing investors remain invested in the fund for bettering their return profile, new investors are taking a sectoral or market-cap specific call. Themes like infrastructure and stock segments, like mid-caps and small-caps, are ‘flavours of the season’ among mutual fund investors. “Corpuses of these funds (that got converted to open-ended schemes) are fairly stable as there has not been much redemption or large inflows, post-conversion. Schemes with appealing themes and strategies are getting fresh investors,” said Lakshmi Iyer, head, fixed income & products, Kotak Mutual Fund .
Fund houses, on their part, are promoting these funds in a big way. They are paying upfront trail commission (for 2-3 years) to encourage distributors to sell these funds.
Source: http://economictimes.indiatimes.com/markets/stocks/market-news/Funds-turn-open-ended-but-investors-stay-on/articleshow/6695142.cms
About 10 close-ended schemes have turned open-ended over the past few months; almost all these funds are attracting money from investors. Among a handful of funds, Religare Mid-cap Fund, SBI Infrastructure Fund , Sundaram BNP Paribas Select Small-cap Fund, DSP Blackrock Micro-cap fund and Kotak Emerging Equity are attracting fresh money from retail investors.
According to mutual fund tracker Value Research, ING Optimix Multi-Manager Equity Option Scheme is the only equity scheme that got discontinued at end-of-term. Birla Sunlife Cash Plus Sweep Daily Dividend Fund and Fortis Overnight Institutional Plus Growth Plan are the only debt funds that got discontinued at term end. All the three funds had low asset bases, said fund researchers.
“A good number of these funds are flexicap funds with a mid- or small-cap bias. People invest in these funds on hopes that mid-cap funds will do well in a booming market,” said Hiren Dhakan, associate fund manager, Bonanza Portfolios. Interestingly, close-ended funds have not seen heavy redemptions, unlike most diversified open-ended equity schemes. Asset bases of funds like SBI Infrastructure Fund, HDFC Mid-cap Opportunities Fund , Religare Mid-cap and Kotak Emerging Equity have fallen only in the range of 11-22%. Usually, investors in close-ended funds prefer to redeem (or book profits) their entire investments at end of term.
“Most close-ended funds that got converted recently are 3-year-old schemes; these funds had raised and deployed NFO money when the markets were trading at record levels (in 2007). While these funds have logged decent one-year returns, they have not been able to outperform key indices on a 3-year basis,” said the marketing head of a corporate-promoted fund house, adding, “Investors are staying put in these funds as they don’t want to redeem their investments (of three years) at a loss.”
While existing investors remain invested in the fund for bettering their return profile, new investors are taking a sectoral or market-cap specific call. Themes like infrastructure and stock segments, like mid-caps and small-caps, are ‘flavours of the season’ among mutual fund investors. “Corpuses of these funds (that got converted to open-ended schemes) are fairly stable as there has not been much redemption or large inflows, post-conversion. Schemes with appealing themes and strategies are getting fresh investors,” said Lakshmi Iyer, head, fixed income & products, Kotak Mutual Fund .
Fund houses, on their part, are promoting these funds in a big way. They are paying upfront trail commission (for 2-3 years) to encourage distributors to sell these funds.
Source: http://economictimes.indiatimes.com/markets/stocks/market-news/Funds-turn-open-ended-but-investors-stay-on/articleshow/6695142.cms
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