In the calendar year 2012, so far we saw five new fund offers (NFOs) in equity schemes by asset managers. All the five NFOs have had different themes ranging from international equities to sector specific. The list got longer in the month of June even as market sentiment remains negative and uncertainties both on the global and domestic front refuse to go away—three more equity funds, with a difference, have been launched in June.
Asset managers are clearly keeping their faith in equities, but it seems they want to distinguish products by focusing on specific and unique themes rather than duplicating what’s already available.
What’s on offer?
As mentioned above, asset managers seem to be focusing on launching distinctive funds. So the launches this month include one index fund, another that invests in international equities and the third having a focused and concentrated portfolio.
India Infoline Asset Management Co. Ltd launched (NFO closed on 19 June) a passive fund, which will invest its entire corpus in the CNX Dividend Opportunities Index (Product Crack | IIFL Dividend Opportunities Index Fund). The index represents top 50 high dividend yielding companies and the IIFL fund will invest in these in the same proportion as they are in the index. ICICI Prudential AMC Ltd has launched a fund that will invest in stocks of companies listed on the American stock markets (ICICI Pru, Morningstar to launch India MF). This is going to be an actively managed fund, which will rely on Morningstar Inc.’s research capability to invest in listed stocks. This is the third US equity focused fund we have seen in recent times. Axis AMC Ltd has launched a fund which is a simple equity diversified fund but will invest only in a maximum of 25 stocks (Product Crack | Axis Focused 25 Fund). Hence, this is going to be a very focused portfolio as opposed to the typically diversified equity funds, which consist of around 45-50 stocks.
What’s the idea?
So why are asset managers going that extra mile to find unique themes to invest in? While ICICI AMC is a veteran, both IIFL and Axis are fairly new at the game.
Says Manish Bandi, fund manager, IIFL AMC Ltd, “Given the current market environment, we are looking at simple products that have general acceptance. With this new fund, we now have two schemes which cover a lot of the market.” He also said that they don’t rule out actively managed funds in the future.
Axis AMC Ltd has a small bouquet of equity funds with under Rs1,000 crore assets under management between them. Says Chandresh Nigam, head investments, Axis AMC Ltd, “We believe there is value in a portfolio of high quality stocks which have high return on equity and reasonable growth; the universe of stocks for this fund is much smaller.” He adds that so far they have launched innovative products across asset classes and will endeavour to continue doing so in future.
ICICI AMC, of course, has been in this business for around nine years and has a well-stocked basket of equity funds. The new fund is an extension of its existing basket—this is the first international equity fund offer by the asset manager. Says S Naren, chief investment officer, ICICI Prudential AMC Ltd, “We are keen on launching products which are uncorrelated to what is already there. This is where the new fund fits in. India’s structural growth story remains but from a diversification perspective there is a need for products which are not so correlated to that and can also benefit investors.”
With nearly 400 different kinds of equity funds in the market currently, it’s no surprise that asset managers are trying to win investors by bringing new products that will offer something different. Moreover, the current equity market sentiment is not in favour of new plain vanilla equity funds as it may take long to build a performance track record, given the volatility.
Unique or not, evaluate these NFOs keeping in mind your existing portfolios and your risk return profile. Remember a different theme doesn’t necessarily mean it is suited to your long-term financial objectives. Diversify your portfolio into these unique themes only if they fit into it.