KOTAK SELECT FOCUS FUND - NEITHER HERE NOR THERE

Srikanth Shankar Matrubai

Kotak Mutual Fund recently came out with a New Fund Offer named Kotak Select Focus Fund.





Kotak Select Focus Fund intends to focus on Select Sectors with untapped Current and Future Growth potential. Fund Manager Mr.Krishna Sanghvi says that this Fund provides adequate diversification compared to a Single Sector Fund while at the same time providing benefit adequate concentration in the portfolio on certain sectors expected to show strong performance.
The Fund will aim to invest in Six Sectors at a time.

COMMENTS AND RECOMMENDATION :
The Fund is positioned between a Sector Fund and a Diversified Equity Fund and thus fails to either enthuse Aggressive Investor or the Risk Averse Investor. Also, with a target of having about 60 stocks in the Portfolio, the Fund fails to classify as a Sectoral Fund, which its name suggests.
The Fund seems to be more of an extension of Kotak Opportunities Fund with a Sectorial bias.
Having Three Fund Manager could also result in too many cooks spoiling the broth.
The Difference between Sundaram Select Focus Fund and the Kotak Select Focus Fund is that Sundaram focus on Specific Stocks and Kotak tends to be more focussed on Top Down Approach i.e, Sector Focussed. So, even if a Stock looks attractive, the Fund will shy away and NOT invest in the Stock if the Sector outlook does not look rosy.
A separate Fund Manager for Debt portion too makes the Fund unsuitable for a Risk-Ready investor looking for a 'Alpha' to his returns.
Kotak AMC has a good track record in almost all its Funds but still the Fund confuses investors with its 'neither here nor there' approach. The ball is in your court.
The Fund is obviously not for the First Time Investor. I suggest AVOID.

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CANROBECCO FORCE FUND

FOR HIGH RISK APPETITE INVESTORS

Srikanth Shankar Matrubai





Canara Robecco has joined the NFO Bandwagon with its Canara Robecco FORCE Fund. FORCE is the acronym for Financial Opportunities, Retail and Entertainment. The new fund offer (NFOs) open for subscription from July 20 to August 18, 2009.

The Fund will primarily invest in Stocks of the above sectors. The Fund will be managed by Anand Shah who was earlier with Kotak and ICICI. Mr.Anand Shah presently manages CanRobecco Emerging Equities, CanRobecco Balance, CanRobecco Infra and CanRobecco MultiCap Fund.

COMMENTS AND RECOMMENDATION:
Canara Robecco has had an excellent past year. And the Economic Times rated many funds right in the top Platinum slot. This should give comfort to first time investors in this AMC.

The Force Fund aims to exploit the India Growth Story by focussing on the Sectors most likely to benefit from Rising Consumer Spending.

Because of its Sector Concentration, the Fund is expected to be volatile and should be considered for investment only by Aggressive Investors who have a good risk appetite. However, the Fund does have a wider choice in terms of Stock Universe compared to other Finance Funds and should do well over a longer time frame, especially above 5 years or more.

Invest if you are willing to stay invested for more than 5 years.

Best of luck,

Srikanth Shankar Matrubai


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SHRIRAM NCD - GRAB THE OFFER

Better than Bank FDs

SHRIRAM NCD OFFERS UPTO 11.5%

Srikanth Shankar Matrubai




Shriram Transport Finance Company Limited after its attractive Fixed Deposit Offering, came out with a Issue of Secured Non-convertible Debentures (NCDs).
Investors can definitely take up the offer as they not only offer Returns higher than Bank FDs but their money is also secured by the Assets of the Compnay.
The company :
Shriram Transport Finance which is among the leading asset financing (commercial vehicle financing) NBFCs in India. The Compnay has a 25% market share in pre-owned truck finance market and has a 7% market share in New Truck Market.
The offer :
The Company is offering 5 investment options.
Investment 3 and 4 come with Put and Call Options at the end of 4 years. The issue offers Coupon rates ranging between 10.75% to 11.5%.
NCD options
Option I: It pays interest every six months and has an effective yield of 11.30 per cent. Redemption is staggered in the ratio of 40 per cent, 40 per cent and 20 per cent at the end of 36, 48 and 60 months respectively.

Option II: It pays interest annually. The principal is redeemed as under option I. Senior citizens are offered an extra return of 0.25 percentage points under both these options. The effective yield on this option comes to 11.25 per cent.

Option III: It offers an interest rate of 11.03 per cent compounded quarterly, with the effective yield coming to 11.50 per cent. It is a cumulative option and hence offers the highest yield. This option comes with a put and call option at the end of 48 months.

Option IV: This option pays interest annually. The yield comes to 11 per cent. Put and call option are available at the end of 48 months.

Option V: This option has been designed for those who want to invest for only three years. The interest rate has been capped at 10.75 per cent and there is no Put and Call option. The maturity amount is paid at the end of 36 months.


Depending on the option you choose, you will get interest semi-annualy, annually or on a cumulative basis.
The minimum application amount is Rs.10000 and in the multiples of Rs.1000.

HOW SAFE IS YOUR MONEY???
The NCD has been rated CARE AA+ by CARE and AA (Ind) by Fitch, which indicates that the company is stable and capable of timely servicing of debt. Further, the NCD is secured by the company’s assets. Consequently, the claims of NCD holders will be superior to the claims of unsecured creditors (like company FD holders, which are unsecured deposits). Bank FDs are insured up to a maximum of Rs 1 lakh.


WHY INVEST :
1)No TDS is payable on Interest Income.
2)Ample liquidity due to listing of NCD on the NSE.
3) Interest recd will treated as “other income”and so will get added to your total income and taxed at the marginal tax rate.
4) If you sell at the stock exchange after 12 months, your gains will be treated as long-term capital gain and will be taxed at 10 per cent without indexation. If you sell in less than 12 months, your gains will be treated as short-term capital gains and taxed at the marginal income tax rate.
5)For low risk taking investors this issue offers a unique opportunity. The current rate on bank deposits is for a tenure of 48-60 months is between 7.5%-8.0%. This issue can earn an investor a spread of 275-350 basis points at a negligible incremental risk.
6) Shriram's Interest Coverage Ratio of 1.49 indicates its ability to service the interest on debt and is better than other Finance Companies like Gruh finance and HDFC.

SHOULD YOU INVEST??

YES!!! OF COURSE!!!
Even for a risk-averse saver bitten by ever falling Bank FD rates, NCDs are great alternative. After all, a three-year fixed deposit will earn you 6-6.5% interest, but a three-year NCD will fetch between 10.5-10.75%.

Not only will you be locking your returns at a higher rate than a Bank FD but also liquidity is easy due to its trading in the Stock Markets!!! If you want to get out, you can get out any time.


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QUANT FUNDS ARE NOT FOR RISK AVERSE

STILL TO PROVE ITSELF IN INDIA



Mr.Mukesh Pandya asked,

Can you explain what is a Quant Fund??/

SRIKANTH SHANKAR MATRUBAI replied :

Dear Mukesh,

Quant Funds are a scientific approach to investing in Stock Markets based on Mathematical model.

The Portfolio of a 'Quant Fund' is based on Computer-based quantitative analysis working on a mathematical model, with no involvement of human judgement. Thus, there is no provision for any emotion or sentiment involved when buying/selling stocks in the Quant Portfolio. The quantitative analysis is undertaken using computer-based models either designed inhouse or outsourced by the fund.

Reliance Mutual fund, for instance, for its Reliance Quant Plus Fund has developed an in-house model, whereas Benchmark has based its Quant Fund on a model designed by Citigroup
Religare Agile Fund (formerly Lotus Agile Fund) launched in Novermber 2007 is India's First Quant Fund.
Quant funds are more popular among the private funds such as hedge funds, rather than among public funds.

The fund invests in a stock universe selected by pre-programmed guidelines. For example, in the case of Religare Agile Fund, the stock should have been listed for at least one year, the market cap of the stock should be higher than the market cap of the S&P CNX Nifty stock that has the lowest market cap, and so on.

The portfolio of stocks is reviewed and reset every month using the quantitative analysis model.

Quant Funds first emerged in the 1970s and became popular in the 1990s as computing methods evolved. According to an estimate, currently over $800 billion in assets under management are invested in quant funds globally.

There are around 200 fund houses in the quantitative space with 120 in the US alone.

SHOULD YOU INVEST???

Based on the performance of the existing Quant Funds, the answer is Firm NO. The model is still new in India and not proven yet but the Quant Fund strategy can be useful when the model is built properly. Religare Agile has had a disastorous performance since its launch inspite of its Large Cap bais.
Religare has underperformed its Benchmark both in Bull and Bear phases. It has lost 32% since inception compared to 12% of its Benchmark.
However, Reliance Quant Plus Fund has done much much better giving a postive return of 4.92% compared to its Benchmark returns of -5.08%.

Let the concept prove itself and then you can commit your funds. For now, if you are really interested, take a sip way to investing and take a call in future.


Best of luck,

Srikanth Shankar Matrubai


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INVESTMENT PORTFOLIO ADVISE

Mr.S. Rao wrote :


"Dear sir



I came across your website accidentally and found it very helpful and interesting. You are doing great job!



My investment goal 5 year, 15 year and 20 year horizon for child's education, marriage and retirement annuity respectively. I am 44 and able to save & pay upto 50000 per annum for the next 20 years.



My bank suggested Unit linked childs plan (with guaranteed maturity benefit) and Pension plans or both of which are high in policy charges. Is it wise to stay away from ULIP plans and invest in SIP MF's, ELSS and ETF'S. Can you please advise the best tax free investment portfolio. How best can I use 10 lakhs which is presently in FD.



Other investments I posess:

Birla Sunlife Income plus Rs 10000

IDFC Income plus:10000

SBI arbitrage opportunities fund:49000



FYI:I recently purchased a site fully paid out. I took Jeevan Astha for 2 lakhs. I have LIC endowment policy for 75000 SA and PPF account.



Regards

Rao



SRIKANTH SHANKAR MATRUBAI
Dear Sridhar Rao,
At the outset, I thank you for your kind words.
For your age, you have done well by already having a site and Good Amount of Savings. Sadly, your investment seems to be too conservative to me. Maybe, in hindsight, this was good as these conservative has protected your capital in the Last year's Crash.

Jeevan Aastha was an avoidable investment. You can find the details about the same in my blog whose link is
http://hubpages.com/hub/JEEVAN-AASTHA-OF-LIC---A-FAILURE. There is very little you can do now, after you have invested.
Continue your LIC Endowment Policy and your PPF Account.
Continue your present investments in
Birla Sunlife Income plus Rs 10000
IDFC Income plus:10000
SBI arbitrage opportunities fund:49000
For now, it is okay to stay invested in the above schemes.
For your investment goal of Children's education, marriage and retirement, you better consider the following.
Out of your existing Mutual Fund Investment (listed above), you can consider these for your child's education. After 1 year or so, when rates stop declining and in case, start going up (not impossible), switch your Debt Funds to Balanced Funds, as your investment horizon is 5 years. Alternatively, take out the money from SBI Arbitrage Fund and invest in the Corporate FD of Tata Motors (3years FD will yield you 12.83%). Click on link http://hubpages.com/hub/SHALL-I-INVEST-IN-TATA-MOTORS-FD


For Marriage & Retirement(15 & 20 years horizon), go for Diversified Equity Funds like
Birla Sunlife Equity Fund
DSPBR Top 100 Fund
DWS Tax Saving Fund
Fidelity Equity Fund
HDFC Top 200 Fund
Sundaram Select Focus Fund
Tata Pure Equity Fund

As and when you near your target/horizon, switch from the above funds and invest in either Debt Funds or Arbitrage Funds gradually., to protect your capital from volatility and lock in the gains you would have made.

For a 15/20 year horizon, ULIPs can be considered. I always say ULIPs are expensive products with high initial charges. I am not in favour of any child plan . If one has enough term cover that will do. Child plans are long term gambles like ULIPs. How well an insurance company manages your investment part is a gamble. These are all ways to get more money from you. At maturity you will realise that the returns are not great. Better to keep INSURANCE & INVESMENT separate.
Compared to Other Child Plans, HDFC in addition to Death Benefit option also offers Critical Illness Benefit.
I however felt ICICI Smart Kid RICH fund is slightly better. You can compare it with HDFC Young Star Plus also, though ICICI Smart Kid scores over it in many aspects.
Invest your 10 lakhs FD in some Debt Fund and go for a Systematic Transfer Plan where in you will gain from both Interest Earnings and as well as Automatic Market Timing through SIPs.
For all your other doubts, refer to my other posts in my blog.
Best of luck,
Srikanth Shankar Matrubai







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FRANKLIN BUILD INDIA FUND - MERITS ATTENTION

AMC TRACK RECORD PROVIDES COMFORT

Srikanth Shankar Matrubai

Franklin Templeton Investment India has launched Franklin Build India Fund, an open-ended equity scheme. The scheme will invest in stocks of companies engaged either directly or indirectly in infrastructure-related activities.

Franklin Templeton has launched a New Fund after a long time.






THE OFFER :

The minimum investment amount under the fund is Rs 5,000 . The scheme will charge an entry load of 2.25 per cent for investment of less than Rs 5 crore. An exit load of 1 per cent will be levied for investments less than Rs 5 crore if the same is redeemed within a year. The scheme will be benchmarked against S&P CNX 500. The NFO will close on August 8.



Finally, Franklin Templeton too has finally fallen to the charm of the "infrastructure" tag after resisting all these years.
Infrastructure as a theme covers almost all Sectors like banking and finance, Construction, Real Estate, Cement, etc.
and Franklin Build India Fund has a wider scope than the recently launched Reliance Infrastructure Fund.

COMMENTS AND RECOMMENDATION :
The Scheme does sound thematic in nature but is more like a Diversified Equity Fund because of its Huge Coverage of Sectors and thus merits attention.
Fund Managers Anand Radhakrishnan & Roshni jain have had a good track record and provide comfort.
The UPA Govt's positive emphasis on Infrastructure will ensure good times for companies in these sector and the fund should be able to cash in on this.
Investors willing with a horizon of 3 years can consider investing in the Fund, especially through SIP.
Though there are about 14 Funds in the Infrasturcture space, Franklin's track record and the growth potential of the Infrastructure sector should work in the favour of the Franklin Build India fund.
INVEST.






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RELIGARE BUSINESS LEADERS FUND - SKIP

Safe Fund from Unproven AMC

Srikanth Shankar Matrubai.







Investors can give the New Fund Offer from Religare, the Religare Business Leaders Fund a miss and not regret one bit.
The Scheme aims to invest in Equities of companies whare are Business Leaders in their respective segments. The Scheme would aim to be fully invested at all times and would invest in a diversified portfolio of Large Caps and Mid Caps.

COMMENTS AND RECOMMENDATION :
There are much betters choice of similar kind of Funds like the UTI Leadership Fund, Sundaram Leadership Fund, Kotak K30 fund. This Fund is thus similar to any Large Cap Fund and thus you are better served by investing in a Proven Fund rather than betting on an unknown Angel.
Don't forget, the Fund itself is quite new, although they have two good winners in Religare Tax Plan and Religare Contra fund.
True, the Scheme would offer sufficient sectoral diversification but the Gains would be restricted in Large Caps in a bull market as seen by none so impressive performance by UTI Leadership and Sundaram Leadership Funds which play on a similar mandate.
By and large, the Fund would be a safe bet for Conservative Investors but it would be wise for the Fund to prove its mettle before you commit your money.



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