Product crack - SBI Equity Opportunities Fund – Series IV2 min read . Updated: 08 Oct 2015, 07:31 PM IST
Like the first and second schemes in the series, this fund too will aim to invest in stocks across market capitalizations and sectors
Even during volatile times in the market, fund houses continue to launch equity funds which are mostly in the closed-end space. The latest fund launched is SBI Equity Opportunities Fund–Series IV (SEO4), from SBI Funds Management Pvt. Ltd.
WHAT IS IT ABOUT?
SEO4 is a three-year closed-end equity scheme. Like the first and second schemes in the series (it didn’t launch a third scheme in the series), this fund too will aim to invest in stocks across market capitalizations and sectors. And even though this a multi-cap fund, it will have a tilt towards mid- and small-cap stocks like the first and second series.
To ring fence itself from unexpected shocks, the fund will avoid investing in companies whose fortunes are linked to external events like global volatility, global commodity prices, and government policies. It will focus on—what it calls—more reliable themes such as consumption that is discretionary.
It also aims to cash in on the Make in India theme, as well as other such initiatives like relaxing of licensing norms for defense equipment production.
The fund house has a good track record across equity and debt. Keeping the SBI Emerging Businesses Fund’s volatile performance aside, its other mid-cap schemes have done reasonably well in recent years. Equities have corrected quite a bit this year, so if you feel—and this is based solely on your judgment as no one can predict accurately how the market will behave—that the market has bottomed out, this could be a good time to enter. But if that is the case it also puts existing funds to an advantage, and not just SEO4.
...WHAT DOES NOT
There is nothing special in SEO4 that sets it apart from the scores of others schemes or even other new funds that have hit the market in the past few years. Being a new fund, SEO4 does not have a track record. There are existing mid-cap funds that come with track records. And being closed-end has its disadvantages. Even if your fund takes-off well, but the market turns volatile later, your fund’s gains could get wiped out towards the end of the closed-end tenure, in this case, three years. Also, even though the equity market has corrected (Sensex is down by 1.69% since the start of the year), it is still overvalued say market experts. So, there is no telling how much more volatility is in store or when the economy would turn around.
WHAT SHOULD YOU DO?
Unless a new fund offer is something unique, it doesn’t make sense to invest in one. Especially, if it is a closed-end fund. Your money is locked in and there is no guarantee that at the end of the three-year period you will gain something. There are many other funds, even within SBI Funds Management, that are worthy of your investment and come with a track record. Hence, it is better to avoid SEO4.