The initial offers of K-Balance and K-Bond will close on November 5. The recently concluded balanced fund IPOs from Birla and Prudential-ICICI have been a roaring success with both the schemes collectively mobilising over Rs 500 crore.

``K-Balance will have a equity exposure of 51-60 per cent while the rest will be in debt. However, unlike K-30, we will not limit ourselves to a particular number of stocks,'' said Prakash Dalal of KMMF. The equity portion of the fund is likely to take exposure to stocks that have strong brands for their products or services and are less prone to business cycles.

The balance fund has a dividend and growth options with the minimum investment pegged at Rs 10,000.

The balance fund has put an entry load of 1.5 per cent which means that for every Rs 100 invested, Rs 98.5 will be invested by the fund while the rest (Rs 1.5) will go to the AMC. There is no exit load. ``The exit load is aimed at preventing inflow of hot money into the fund,'' said Dalal. The entry load of 1.5 per cent is the highest for the balance funds launched recently. While Birla Balance was sold on a no-load basis, Prudential-ICICI charged a one per cent entry load.

``Given the kind of appreciation that equity and balance funds have given, an entry load of 1-2 per cent nominal. Besides, investors get back almost the entire amount charged as an incentive from their broker. Thus, if you have invested Rs 10,000 and your entry load is Rs 150, you are likely to get back Rs 100 as an incentive,'' said an industry observer.

The portfolio turnover of the fund is likely to be around 150 per cent. Thus, the fund manager will be aggressive with the equity component of the balance fund. Total annual recurring expenses in the fund have been pegged at 2.25 per cent per annum.

KMMF has split the bond fund for retail and high networth investors. The deposit plan under K-Bond is suited for the needs of the retail investors while the wholesale plan is targeted at large, corporate investors. The move is aimed at protecting the bond fund and retail investors from the impact of fresh investments or redemptions by a large investor.

``The bifurcation will prevent the destabilising impact on the NAV in the event of a large redemption. This usually hits the retail investors which invest for the long-term. In the other case, large investments amidst falling interest rates pulls down the overall returns from the fund,'' said an analyst.

Both the plans offer dividend and growth options. The AMC provides for declaration of semi-annual dividends on availability and adequacy of distributable surplus. The plans will have different NAVs. While the minimum investment in the deposit plan is Rs 10,000, the wholesale plan entails a minimum investment of Rs 25 lakh. The annual recurring expenses in the deposit plan has been pegged at 2 per cent while the expenses are 1.15 per cent in the wholesale plan. The recurring expenses of 1.15 per cent in the wholesale plan can be attributed to a lower investment management fee of 0.70 per cent against 1.25 per cent for the deposit plan. Besides, marketing and selling expenses will be lower due to the size of the minimum investment.

In the case of wholesale plan, investors need to give a 15 day notice for redemption. This will help the fund manager prevent any asset liability mismatch. However, the fund will charge an exit load of one per cent if the notice is not given.