Name of NFO
SBI PSU Fund
What is it about
The NFO is an equity-diversified thematic fund that aims to invest in public sector companies. These are companies where the government has at least 51% ownership stake.
Over the years, nudged by the private sector and the spreading fingers of globalization, public sector firms have improved across many performance parameters, including productivity, efficiency and profitability. Select public sector stocks, though usually discounted lower than their private sector peers, do display a steady dividend history. Further, the government pledge to push reforms leading to staggered disinvestment indicates that there is a steady pipeline of such stocks that will come over the years.
Although well-priced state-owned companies offer a fairly long-term upside, along with dividends, there is no unique investment opportunity they offer that a diversified equity fund does not already provide. Many existing diversified equity funds already have a healthy exposure to public sector stocks if the stocks are industry leaders in their segment. Besides, thematic funds are riskier than diversified funds as they focus on few scrips or sectors.
Mint Money take
In terms of investment opportunities, public sector companies are no longer frowned upon. Many are monopolies in their own segments and command good valuation, others attract significant investors, both domestic and global, on account of change in their culture. But why limit your investments to either publicly or privately held companies as long as they are well-managed and make money for them and you. Alternatively, allow the fund to build a track record and then consider investment.