Birla Sun Life Mutual Fund recently launched India Reforms Fund, an open ended equity scheme. The fund will invest in companies that are expected to benefit from economic reforms, PSU divestment and increased government spending . This would include investing in companies from quite a range of sectors like oil and gas (deregulation or petroleum product prices), banking and financial services (financial sectors reforms), PSU companies coming with IPOs (reforms of disinvestment) and so on. The investment horizon is quite wide – including utility companies, fertiliser, power,engineering, real estate, construction, commodity & mining and education.
The new fund offer (NFO) closes on June 9, 2010 and is benchmarked against S&P CNX 500 index. The fund manager plans to invest across market capitalisation of companies in the above sectors. The scheme will invest in multi sectors?which could be at different stages of reform?at any given point in time. In terms of asset allocation, it plans to invest upto 35% in debt and money market instruments. To that extent, this fund could take higher cash calls.
Equity track record
Birla Sun Life has an average risk-adjusted return of three star rating for its equity funds. This indicates that its fund management skills are ‘average’. The highest rating is that of five-star given by Value research, a fund tracker.
Ankit Sancheti, the 33 year old fund manager who is managing fund, has a better track record. He currently manages six schemes?out of which three are independently managed. And for these funds, the average rating is four-star. While Birla Sun Life Basic Industries has a three-star rating, Birla Sun Life Dividend Yield Plus is a five-star fund. Birla Sun Life Long Term Advantage I is not yet rated.
The fund’s investment mandate?while interesting to look into? doesn’t differentiate itself much from other equity schemes. The list of sectors it is investing almost covers the entire list of BSE 500 stocks. Investors looking to benefit from the reform process in the country can certainly invest in the fund. But even a normal equity fund will do the same?though they might not call it. And what if the reform processhits a roadblock, which is normal? Could that mean the return metre will stop at that point for Birla Indian Reforms Fund?
There are handful of so-called speciality funds that have been launched to suit the trend. Birla in the past has launched Genext (focus on businesses benefiting from young consumers), Sundaram Rural India, SBI One India, Kotak Lifestyle or Tata Service Industries. Their returns haven’t been any different from diversified equity funds. In fact, they have languished with small asset size and mediocre funds. While it is too early for investors to buy into Birla India reforms, building a good track record perhaps should make the investor reach for the cheques in future.
