ICICI Target Return Fund - Invest

Srikanth Shankar Matrubai


A rare NFO, which is good

ICICI has come with a New Fund Offer named ICICI Prudential Target Returns Fund, an Open Ended Diversified Fund. The objective of the Fund is to Generate Capital Appreciation by investing in equity/equity related instruments of BSE100 and, providing investors with options to withdraw their investment automatically based On Triggers as when and when achieved.

The fund offers investors an option to switch out their capital appreciation or entire investment when the fund reaches a particular target, preset at either at 12%, 20%, 50% or 100%. This will help the investor to book his profit and protect any downward fall.

A back testing carried by the AMC shows that a trigger @ 20% moved into even a normal savings account would have given a return of 14.92 on a Rs.10 NAV., whereas not using the trigger would have left your NAV at 10.04 inspite of the NAV having touched a high of 21.
(This Simulation is based on a Value of Rs.10 invested on 01 Jan 2006 till March 2009).

Comments:
This scheme will give comfort to first-time investors, who usually come when markets are at peak and then lose out money when they fall. This scheme will book profits regularly in a discipline manner. Profit booking in a disciplined manner is essential. Investors tend to become greedy when they see appreciation and become fearful during correction and this fund will eliminate such greed. The Trend seen in the last two years clearly shows that a bit of Active approach is essential even in Mutual Fund investments and this Fund addresses this need.

Positives :
1) The Trigger Mechanism will automatically ensure Rebalancing.
2) With Triggers, Returns are locked at regular returns and Value is preserved in the event of a Subsequent fall.
3) The fund intends to invest in Large Caps, which is a comforting factor.
4) The Fund is being launched after the Stock Market have seen a Big Correction and is Attractively Valued, thus the probability of the Fund achieving its 'Targets' is rather high.


Negative:
1) The biggest negative of the Fund is that due the Mandate, the Fund Manager is forced to Sell out Stocks as soon the Stated Target is achieved and may well miss Higher Returns if held.
2) There is no Guarantee that the Fund will meet its 'Trigger Target' if the Markets were to stay Range Bound to Negative.
3) In the Event of a Bull Run similar to 2 years back, than there is a risk of losing the Benefits of compounding Returns.


Recommendation:
The Fund should do well and one can invest going by the Fact that the Fund will be investing in Large Caps and the Markets too look attractive over the Next two years at least. The Fund may not give Huge Gains but does promise to protect your gains in the event of a market crash.

Invest with the Option of 20% Trigger Target and Switch to ICICI Liquid Plan - dividend Reinvestment Option.

One can consider investing in this Fund

Best of luck,
Srikanth Shankar Matrubai






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TAURUS ETHICAL FUND - AVOIDABLE NFO

Hello,
Taurus Mutual Fund has launched a New Fund named Taurus
The New Fund Offer has already open now and will close on 20 March 2009.
The Fund is particularly targetted at Investors who want to put their money in a Shariah-compliant instrument. The fund will make investments only in the shares of companies that are compliant with the dictates of the Shariah, which forbids ties with companies involved in banking, alcohol, tobacco, gambling, non-halal meat or pornography. As interest cannot be earned on investments made as per Shariah laws, the fund will not invest in debt either.


COMMENTS AND ANALYSIS :
New Funds are a strict no-no for me. And coming from a Fund House with a pathetic trackrecord, it is better to avoid the New fund Offer. The fact that Fund's stock universe is limited may also restrict its potential to deliver high returns. Better to stick to an existing Diversified Fund.

Best of luck,
srikanth shankar Matrubai





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IDFC India GDP Growth Fund

IDFC has recently launched a New Fund Offer named IDFC India GDP Growth Fund.

The IDFC India GDP Growth Fund seeks to invest the assets in the sectors representing the three components of India's GDP viz., Agriculture, Services and Industry. The allocation to these levels of GDP will be in the same proportion as their contribution to the overall India's GDP, and will normally be revised on a semi-annual basis, or whenever the GDPgrowth estimates are revised.

COMMENTS AND RECOMMENDATION :

The Fund is innovative and aims to capture the Growth in India's GDP. The Fund would act as a Good Diversified Fund as it will be investing in Stocks in Sectors and Industries across market captilisation. The Fund Manager, Mr.Ajay Bodke has had a good expertise in managing Funds and has performed reasonably well. The Fund may a Good Pick for Long Term Investors.

The Fact that India's economy is relative insulated from the Global meltdown and that India is better positioned better than most countries makes Indian Markets attractive and India should better GDP numbers going forward. This in turn will help the Fund give good returns.

The Fund, however, may not find it easy to mirror the GDP. Besides, there are not many great performers in the agriculture sector and getting right stocks in optimum proportion would not be very easy. Also, not all the sectors of the economy would perform in a similar manner at any given point and hence the fund has to remain invested in a particular sector in a particular proportion and this is a negative of the new fund.

IN A NUTSHELL, THERE ARE MANY TOP PERFORMING FUNDS WHICH OFFER SIMILAR FEATURES AND HAVE A TRACK RECORD TO BOAST OF. RISK AVERSE INVESTORS WOULD BE BETTER OFF TO WAIT FOR THE FUNDS PERFORMANCE TO COME OUT AND THEN TAKE A CALL. OTHERS CAN TAKE THE SIP ROUTE AND INVEST IN THE FUND.

Best of luck,
Srikanth Shankar Matrubai


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DBS CHOLA TAX ADVANTAGE FUND - AVOID

DBS Chola Mutual Fund has launched DBS Chola Tax Advantage Fund – Series 1. The fund is a 10 - year close ended equity linked
saving scheme, subject to a lock in for a period of three years from date of allotment.

The fund which opened December 19, will close on March 19. The objective of the scheme is to seek to generate long-term capital growth from a diversified portfolio of predominantly equity and equity-related securities and also enabling investors to get income tax rebate as per the prevailing Tax Laws and subject to applicable conditions. The fund, benchmarked against BSE 200 Index would invest between 80- 100% in Indian equities and equity related securities and 0% to 20% in money market instruments / debt securities instruments.

Sanjay Sinha, chief executive officer, DBS Cholamandalam Asset Management said, "this fund will follow 'value investing strategy'. Current market conditions favour this strategy as it limits the downside potential of these stocks. In addition to the tax benefit, a 3 year lock-in allows investors to realise a better potential for their investment."

The minimum amount for application during the new fund offering period will be Rs. 500 and in multiples of Rs. 500 thereafter.

MY TAKE :
Though the Fund House has been in existence for quite some time, it has just been an also ran with none of its schemes ranking among the Top 10. Sure, it has Sanjay Sinha in its rank who joined recently, but he will have a tough job ahead to prove himself in these volative times.
The Fact that your fund is locked in for 10 years also goes against this fund. You are better off by investing in Existing Proven funds rather than Putting in an Unknown Specie yet to prove itself. It is like a Known Devil is Better than an Unknown Angel.
AVOID.

Best of luck,
Srikanth shankar Matrubai
Bangalore


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BHARTI AXA TAX ADVANTAGE FUND

Yet another NFO, yet another Tax Scheme. The Bharti Axa AMC, which began operations in September 2008, has launched Bharti AXA Tax Advantage Fund, an open-end equity linked savings scheme.

This will be a diversified multi-cap fund. The fund won't be biased towards any sector or market capitalization. It also has a leeway to invest up to 20 per cent in debt and money market instruments.

MY TAKE
The fund house, being a new player, has a long way to go to prove its worth. At this point of time investor's have been extremely choosy about their investments. You can as well look at existing Well Performing Schemes Like Sundaram Tax Saver, Birla Tax Relief 96, etc.

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JP MORGAN INDIA TAX ADVANTAGE FUND

JPMorgan Asset Management India on Thursday launched its open-ended equity linked savings scheme (ELSS) – the JPMorgan India Tax Advantage Fund, which is benchmarked against the BSE 200 Index. The new fund offer opens on 18 December and will close on 16 January 2009.

The scheme is essentially an equity fund with a three-year lock-in period. The investment objective of the scheme is to generate income and long-term capital appreciation from a diversified portfolio of predominantly equity and equity-related securities.

The scheme is eligible for tax deduction under section 80 C of the Income Tax Act.

Minimum initial application costs Rs. 500 per application and in multiples of Rs. 500 thereafter.
The fund is also the first green launch by JPMorgan Asset Management in the country. The attempt will be to minimise the use of paper by encouraging prospective investors to download all applicable literature from the website and print only as per specific requirement so as to ensure minimum wastage of paper.

Said Krishnamurthy Vijayan – CEO & whole-time director, JPMorgan Asset Management, "In a typical NFO, lakhs of application forms and other material is printed & distributed and less than probably 0.5% of them get utilised.

Imagine the number of trees we cut to run just one NFO. We must all become more conscious about this destruction. With this in mind, we decided that the JPMorgan India Tax Advantage Fund would be a green NFO."


MY TAKE :
JP Morgan has a unique way of assigning fund managers to its equity schemes. The AMC assigns four managers to each scheme. And like its previous two equity diversified funds, this fund will have four managers as well.However, looking at its existing schemes performance, this has not really worked well. And the brief history of this equity fund house does not make this new offer a compelling choice as it is difficult to ignore the existing 32 open-end tax saving funds, some of which have impressive track records.



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IDFC TAX FUND - AVOID

IDFC AMC which manages assets worth Rs 8,686 crore across 78 schemes (as on 30 November) has launched IDFC Tax Advantage (ELSS) Fund an open-ended equity linked saving scheme. This fund will invest in equity and equity related instruments
The IDFC Tax Advantage (ELSS) Fund with a minimum subscription of Rs. 500, will not only help investors avail of a tax benefit, but also seek to generate long term capital growth from a diversified portfolio of predominantly equity and equity related securities. The scheme will invest in well-managed growth companies that are available at a reasonable value and offer a high return growth potential.
Mr. Naval Bir Kumar, Managing Director, IDFC Mutual Fund says “We are happy to offer The IDFC Tax Advantage (ELSS) Fund to investors who are looking for a tax break as well as an easy and affordable way to take advantage of the growth potential of equity funds.” He continues, "The scheme will invest in well managed growth companies that are available at a reasonable value and offer a high return growth potential to investors,"
Idea distiller: IDFC does not have a tax plan as yet. As the last three months of a financial year see a lot of people rushing to invest in tax-saving schemes, it is an ideal time for IDFC to push an ELSS.
MY TAKE ON IDFC TAX FUND:
IDFC's equity funds have a rather brief history. Invest in this fund only if you want to go in for a low-cost NFO rather than an existing scheme with a higher NAV.
It is better to invest in a fund that has earned enough to reach a high NAV, some of them with compelling track record and a well defined portfolio characteristics and thus ensures dividends for the period that you are locked in, and has a fund manager who has excelled in managing assets across all cycles of the market.
In a nutshell, AVOID

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UTI Gold-Equity Fund

Mr.Sridhar wrote
"sir, I like your blog goodfundadvisor very much. Can you please throw light on the new fund UTI Wealth Builder Fund which has a combination of Gold and Equity"

SRIKANTH SHANKAR MATRUBAI replied :
Dear Sridhar,
UTI-Wealth Builder Fund - Series II, is an open-ended equity oriented scheme. The objective of the Scheme is to achieve long term capital appreciation by investing predominantly in a diversified portfolio of equity and equity related instruments along with investments in Gold ETFs and Debt and Money Market Instruments.
The fund aims to invest about 65% in equities and 35% in Gold ETFs and debt instruments.
This combination of equity, debt and gold is an innovative scheme and looking at the asset allocation and large cap tilt, it should be a conservative offering with low volatility.
Gold has been one asset that has been counter-cyclical in nature and hence an ideal asset in portfolio diversification.
Thus this fund will be a Low risk and Low Return Fund as it be investing mainly in Large Caps.
This Fund is for Ultra Conservative Investor with a view to have slight exposure to Equities. Sure, invest in this fund, if you want to have a Low Risk Low Return Fund. I do not expect this fund to give you returns more than 12% on an average. Even in Super Bull Market, the fund could give a max of 15-18% return.
Instead you can consider investing in Good diversified Equity fund and some allocation to Gold ETfs.
Best of luck,
Srikanth Shankar Matrubai,
Bangalore

JP Morgan Alpha Fund

‘Too many cooks spoil the broth’ is an old saying that holds true today as well. Incidents of too many people worsening a situation have had the saying being repeated again and again. And that’s something that the fund managers of the JP Morgan India Alpha Fund have to try and not prove true. Why? Because the said fund has not one, not even two, but four fund managers – Mr. Harshad Patwardhan and Mr. Amit Gadgil to look after the equity component of the scheme and Mr. Nand Kumar Surti and Mr. Namdev Chogule to manage the debt portion.

And that’s not the only thing ‘different’ about the fund. An equity-oriented fund, JP Morgan India Alpha, has a unique strategy of aiming to wipe off market risks by adopting various market neutral strategies. Confused? Here’s how the strategy works… The strategy the fund will adopt is one that is being used by hedge funds. A market neutral strategy is one where the fund manager takes a long position (buy) and a short position (sell) at the same time. The idea is to generate returns over and above the market returns through superior stock selection skills and thus, reducing the market risk to nearly zero.

For example, if we look at the current hike in oil prices, it is beneficial for the oil companies but is not good for the airline industry. If the fund manager believes that the oil price hike would continue, he would buy the shares of an oil company and short sell the shares of an airline company, thus giving rise to two situations. The first situation is when the oil prices go upward and the market goes up, the oil companies would benefit from the strong market sentiments and strong oil prices. The second situation is when the oil prices start falling or a market situation indicates the decline in the oil prices, then the fund manager will close out the trade and thus the market neutral strategy is safely used.

But the success of this strategy lies in the competence of the fund manager and whether or not he is able to rightly capture the correlation and risk factors. Any incorrect estimation by the fund manager may lead to heavy losses. Although JP Morgan Asset Management Company has a considerable experience in handling similar funds globally, whether their experience would succeed to be a key factor in taking the Indian investors into confidence remains to be seen.

The scheme is an interval scheme that opens for sale and repurchase of units at fixed intervals.
Source : Value Research

I for one, feel that this could give a return of just about 10% simply by looking at its Benchmark, which is, surprise, surprise, Crisil Liquid Index, so investment is not recommended for long term. Much better to stay put and watch the fund\'s performance for about 6 months or so, and then take a call.
Regards,
Srikanth Shankar Matrubai

HDFC Select Equity

Yet another "Same But Different" NFO.
Same because of its investment mandate and strategy. Different only by its name.


At a time when fund houses are trying to go one-up on each other by launching unique and different mutual funds, HDFC Mutual Fund has decided to stick to the much tried and tested route. The AMC has filed an offer document with SEBI for its eighth open-ended equity fund.

And hence, HDFC Select Equity will be another plain vanilla equity offering. The fund’s investment strategy is similar to some other funds offered by the same AMC and a lot many others offered by other fund houses. The fund will invest at least 65 per cent of its assets in equity oriented, well managed companies with a proven track record. An upper limit of 35 per cent has been kept for investments in debt, including securitized debt. And of course, the fund has the flexibility of investing across sectors and market capitalizations.

The fund will be benchmarked against BSE 200 and will the third open-ended equity scheme from the HDFC family to have the same benchmark. The other two funds are HDFC Core & Satellite and HDFC Top 200.

During the NFO period, investments of less than one crore will attract an entry load of 2.25 per cent while the ones above one crore will be exempted from entry load. An exit load of two per cent will be charged if the redemption is made before one year, one per cent if redeemed after one year but before two years, while no load will be charged on redemptions after two years.

I feel you are better off by investing in an existing Fund from the same Fund House like HDFC Growth Fund or HDFC Equity Fund.