Generally, with new fund offerings (NFOs), most are imminently forgettable. Often, they are created as easy avenues to capture management fees and increase the asset base of the fund house. Either they milk the theme of the moment or they are just clones of existing funds under a peppy name.
In the past six months, 46 equity schemes have been introduced. They have their charm and Value Research has its reservations. Here they look at a few very recent NFOs that have generated substantial interest. We are certainly not into recommending them but just stating our observations.
Kotak Indo World Infrastructure
This fund attempts to shoot two birds with one stone. On the one hand, it wants to hop on to the infrastructure bandwagon. On the other, it wants to simultaneously gain an exposure to the global market. So the Kotak Indo World Infrastructure Fund will invest in stocks of domestic and global infrastructure companies, with the bulk of investments going to the former.
The fund proposes to invest at least 65 per cent of the corpus in Indian equities. For the overseas exposure, it will invest in a feeder fund. A global infrastructure fund of T Rowe Price (to be launched soon) should serve this purpose. It has an option of investing between 10-35 per cent in this feeder fund. The debt and money market exposure can go to a maximum limit of 35 per cent.
Infrastructure has definitely been the hottest theme with funds focused on infrastructure-related companies leading the pack of top performers in the recent past. But there is no dearth of existing funds to choose from, 13 to be more precise. So why even consider this fund? You should not. Unless you want to tap the growth potential of global infrastructure related companies as well.
The fund's propensity to invest abroad and spread its risk across sub sectors (infrastructure is a big theme that encompasses many sectors) will help limit the downside risk should a sector or country gets battered. This will be particularly useful when Indian infrastructure stocks go out of favour in a market downturn.
Issue opened: November 27, 2007
Issue closed: December 22, 2007
Type of Fund: Close-ended for 3 years
Benchmark: S&P CNX Nifty (65 per cent of portfolio), MSCI World Index (35 per cent of portfolio)
Fund managers: Krishna Sanghvi (domestic equity), Abhijeet Dey (overseas), Ritesh Jain (debt)
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