Product Crack: Birla Sun Life Emerging Leaders-Series 2

The launch of closed-end schemes continue. Soon after closing the first of its series of closed-end small- and mid-cap schemes on 5 May, Birla Sun Life Asset Management Co. Ltd has now launched the second fund in this series. Called Birla Sun Life Emerging Leaders Fund-Series 2 (BELF-2), this scheme is a three-year closed-end scheme that will invest in small- and mid-sized companies. The fund house has defined a large-cap stock as one that is among the top 100 companies ranked by market capitalization. The next 100 companies are classified as mid-cap, and the rest as small-cap.

WHAT WORKS?

The fund’s launch timing is good. Fund houses are buoyant on the back of the election results. In anticipation, equity markets have risen significantly in the recent past. So far this year, while the S&P BSE Sensex returned 15%, the S&P BSE Mid Cap index returned 19% and S&P BSE Small Cap index returned 26%.

Fund managers are expecting equity markets to go up significantly from here on, and BELF-2, with its closed-end proposition, is hoping to cash in on just that. The scheme promises to give you the money after three years; it will not be converted into an open-ended scheme.

When the prospects of equity markets look good, small- and mid-cap companies tend to give higher returns among all market capitalization segments. This scheme follows a bottom-up strategy but the fund manager likes sectors such as banking, capital goods and auto. It expects to be invested in 30-35 stocks.

WHAT DOESN’T?

The fund may have a strategy in place to take advantage of the current state of the economy and the expected uptick. But the same can be said about any existing and well-managed equity mutual fund (MF) scheme. BELF-2 is new and lacks a track record. Existing schemes in the mid- and small-cap category are as well placed to benefit from growing markets as any other new launch. New schemes, especially the closed-end variety, have a way of creating a buzz in the market by incentivising the distributors.

MINT MONEY TAKE

Birla Sun Life AMC has a decent track record in managing equity but BELF-2 can do better on account on its closed-end structure and its time of launch. We, however, suggest that you stick with existing schemes that come with a track record. Pick any mid-cap scheme from Mint50, Mint’s chosen set of schemes that we recommend to our readers.