Wednesday, October 17, 2012

Prajna Capital

Prajna Capital


DSP BlackRock World Agriculture Fund

Posted: 17 Oct 2012 04:29 AM PDT

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Investment Objective

The primary investment objective of the Scheme is "to seek capital appreciation by investing predominantly in units of BlackRock Global Funds-World Agriculture Fund (BGF-WAF). The scheme may, at the discretion of the investment manager, also invest in the units of other similar overseas mutual fund schemes, which may constitute a significant part of its corpus. However, there is no assurance that the investment objective of the scheme will be realised. It shall be noted that "similar overseas mutual fund schemes" shall have investment objective, investment strategy and risk profile/consideration similar to those of BGF-WAF.

 

Is this fund for you?

DSP BlackRock World Agriculture Fund (DB-WAF) is an open ended fund of funds scheme from the stable of DSP BlackRock Mutual Fund. It is a feeder fund which will predominantly invest in units of BlackRock Global Funds-World Agriculture Fund (BGF-WAF), and thus take opportunities emerging within the agriculture theme.

 

Since DB-WAFs investments will be predominantly in the BGF-WAF (along with units of other similar overseas mutual fund as deemed fit by the investment manager) its performance will be directly linked to the performance of BGF-WAF and other similar such overseas mutual funds; which invests in the equity and equity related securities of agricultural companies across the globe.

Outlook of Global Agriculture Sector

Growing global population requires countries either to accelerate on their agriculture commodities production or import them (if they are deficient in natural resources and technological resources), in order to satisfy the growing demand. However, supply of arable land and other natural resources remains limited and improvement in the farm productivity is imperative. The Governments across nations are looking to reduce the ill effects of using conventional fuels, as global warming have caught the attention of environmentalist and Governments who are now attempting to diversify their fuel supply.

 

The consumption pattern too, has undergone a change - thanks to growing wealth of emerging nations. Countries such as China and India, which are accelerating on their economic growth rate, have a robust consumption theme, and thus FMCG sector (which for some products is fed by agriculture commodities) has shown resilience despite having faced the brunt of rising cost of living. They have outperformed on this consumption theme due to healthy consumer confidence as compared to developed nations.

 

Hence, we believe that investors' need to be careful and assess their risk appetite and their preference of geographical diversification before committing to a feeder fund like DB-WAF, because the exposure to developed nations such as the U.S, is dominant in the underlying fund.

 

Portfolio & Investment Strategy: DSPBR-WAF

DSP BlackRock World Agriculture Fund (DB-WAF) is an offering from DSP BlackRock Mutual Fund which will predominantly invest in units of BGF-WAF (along with units of other similar overseas mutual fund as deemed fit by the investment manager), by allocating it assets in the under-mentioned manner:.

 

Particulars

Approximate Allocation (% of corpus)

Risk Profile

Units of BGF-WAF or other similar overseas mutual fund scheme(s)

95% to 100%

High

Money Market Instruments

0% to 5%

Low to Medium

 

Portfolio & Investment Strategy: BGF-WAF

BGF-WAF seeks to maximise the total returns. The fund invests globally at least 70% of its total assets in the equity securities of agricultural companies. Agricultural companies are those which are engaged in agriculture, agricultural chemicals, equipment and infrastructure, agricultural commodities and food, bio fuels, crop sciences, farm land and forestry.

 

The Fund invests across market capitalisations and geographies and holds stocks in the range of 40-70. However, the number of stocks held by the fund may actually breach the mentioned range.

 

Region

BGF-WAF in %

Dax Global Agribusiness index in %

USA

60.6

57.5

Asia Ex China

14.5

21.0

Europe (Ex UK)

11.3

10.8

UK

2.9

1.4

Canada

2.8

5.8

Latin America

1.1

0.0

China

0.9

2.6

Africa and Middle East

0.9

0.0

Australasia

0.7

0.9

Cash

4.3

0.0

The aforementioned table reveals that exposure to the U.S. occupies a dominant portion to the BG-WAF's portfolio, which in turn closely links the performance of DB-WAF to the U.S.'s agriculture sector, in a time when the global economic scenario is experiencing a gloom.

Risk Factors associated with BGF-WAF

  • Currency Risk: As the underlying scheme will invest in securities which are denominated in foreign currencies (e.g. US Dollars), fluctuations in the exchange rates of these foreign currencies may have an impact on the income and value of the scheme.
  • Sector Concentration Risk: Being a thematic fund of fund scheme, DB WAF is exposed to the sector concentration risk. Although the fund has flexibility to invest in other schemes similar to BGF-WAF; these investments too would be limited to a narrow theme of agriculture and hence could be sensitive to movements in underlying sectors.
  • Country Risk: The fund has invested the dominant proportion of its corpus in the United States, and hence the performance of BG-WAF would be closely linked to economic, political, and social risks imbibed in the United States.

Performance of BG-WAF

Scheme

1 month (%)

3 month (%)

6 month (%)

1 Year (%)

Year to Date

Global Funds-World Agriculture Fund

-2.6

-5.2

-7.5

20.5

-2.8

DAX Global Agribusiness Index

-3.8

-5.0

-6.6

21

-1.9

 

Being benchmarked against DAX Global Agribusiness Index, BGF-WAF has a track record of a little over 1 ½ year (launched on February 9, 2010), and as on August 31, 2011 the fund has managed asset worth USD 587.8 million. So far the performance table of BGF-WAF reveals that it has been more or less in sync with that of the DAX Global Agribusiness Index; but a noteworthy point is alpha returns haven't been delivered.

 

Fund Manager Profile

DB-WAF will be managed by Mr. Mehul Jani - the dedicated fund manager for managing overseas investments at DSP BlackRock Mutual Fund. He holds a Masters' degree in Banking and International Finance (from Cass Business School at City University, London) and has to credit a CFA Charter. Mr. Jani has a total experience of 6 years in investment management, and prior to joining DSPBlackRock in October 2008, he was associated with the Morgan Stanley, London.

 

Fund Outlook

While agriculture theme per se is evergreen, DB-WAF's performance would be closely linked to the performance of its underlying fund – BGF-WAF, as DB-WAF is a fund of funds scheme. BGF-WAF's portfolio reveals a dominance of investing in the U.S which exposes its investors to a country specific risk. Moreover, though the strategy of capitalising on the opportunities available in the global agriculture space appears to be a prudent one; investors would be exposed to several risks including some explained above.

 

Also from a cost point of view, since DB-WAF is a fund of fund scheme, its investors would have to bear additional cost (in terms of dual management fees and expense ratio. Recurring expenses are estimated to be around 2.5% of average daily net assets. Besides, BGF-WAF charges initial fees as high as 5%. Higher expenses such as these would definitely eat into your returns.

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Download Mutual Fund Application Forms from all AMCs

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Best Performing Mutual Funds

    1. Largecap Funds:
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    3. Mid and SmallCap Funds
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    4. Small and MicroCap Funds
      1. DSP BlackRock MicroCap Fund
    5. Sector Funds
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    6. Gold Mutual Funds
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

 

ICICI Prudential Services Industries Fund

Posted: 17 Oct 2012 03:03 AM PDT

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Services industries sector covers wide gamut of activities such as trade, banking and finance, infotainment, telecommunication, railways and technical services among others. At present, the service sector constitutes a dominant proportion of our nation's economy. Post liberalisation, companies within the Services sector have so far displayed robust growth which not only led to service industries be a dominant contributor to the economy but has also encouraged many fund houses to offer this theme for investment.

ICICI Prudential Services Industries Fund (IPSIF) is one such open-ended equity fund from the stable of ICICI Mutual Fund. IPSIF predominantly invests in equity and equity related securities of companies belonging to the services industries, along with debt and money market instruments to provide the stability to the portfolio and to manage its liquidity requirements. Launched in November 2005, the fund has been in existence for over 5 years now.

The primary investment objective of the scheme is "to provide capital appreciation and income distribution to unit holders by investing predominantly in equity/equity related securities of the companies belonging to the service industries and the balance in debt securities and money market instruments. However, there can be no assurance that the investment objective of the Scheme will be realized".

IPSIF follows a mandate of investing 70% - 100% of its assets in companies in the "services sector" domain, and upto 30% of its assets in debt and money market instruments.

Over the past one year, the fund has held a major portion (i.e. 45% - 69%) of its portfolio in large cap stocks, and in the mid and small cap space 26% – 47% of its assets. In debt and cash, the fund's exposure in the last one year has been upto 10% of its total assets.

IPSIF selects stocks from the universe of below listed industries

  • Auto Components
  • Aviation
  • Banking and Financial Services
  • Garment Accessories
  • Communications
  • Construction
  • Consultancy
  • Education & Training
  • Healthcare
  • Hospitality
  • IT & IT Enabled Services
  • Logistics & Distribution
  • Media and Entertainment
  • Power Generation, Transmission & Equipment
  • Telecom
  • Tourism
  • Trade and Retail
  • Transportation & Shipping

 

Equity Portfolio

IPSIF is benchmarked to the CNX Service Sector Index. Its latest portfolio (i.e. as on September 30, 2011) constitutes of 32 stocks, where the top-10 stocks account for 52.9% of the portfolio while the top-5 sectors account for 66.9% of its portfolio. The fund manager doesn't churn the portfolio very aggressively as revealed by the portfolio turnover ratio of 0.82 times.

 

How IPSIF has fared vis-à-vis its peers

The table above reveals that IPSIF's performance vis-à-vis its peer is quite competitive. On 3-Yr return the fund has fared almost in sync with its benchmark (CNX Service Sector index). However, over 5–Yr time frame it has underperformed its benchmark by a noticeable margin, by clocking returns of mere 4.3% CAGR, as against the 7% CAGR returns generated by CNX Service Sector.

 

Fund Manager Profile

Name of the Fund Manager

Mr. Sanjay Parekh

Total Work Experience

Over 14 years

Managing the fund since

Aug-09

Qualifications

MBA (Finance)

 

Even though the returns delivered by ICICI Prudential Services Industries Fund are competing within the category, they are nothing to vie for when seen on a risk adjusted basis. Moreover, since the fund focuses on investing in companies in the "service sector" domain, its fortune would be closely linked to the theme, which makes it a risky investment proposition for one's investment portfolio.

An opportunities fund instead, can help you invest in sectors that have the potential to generate stellar returns. Although they too are not risk free investments; they are better placed than the thematic and sectorial funds in managing risk. In today's dynamic world, attractiveness of a particular sector can change rapidly as happened post 2008 crisis. In such times a thematic fund would be forced to stick to the same sectors referred in the mandate. On the other hand Opportunities funds would be nimble enough to change the guard. Which category of funds would you now like to invest in to benefit from the broader economic and industry trends?

In depth analysis of the schemes can help you identify potential winners in the each category of mutual funds. However, investing even in the best performing sectoral or a thematic fund wouldn't be a wise decision as you might be investing at the time when the underlying sector or a fund might be at its peak.

------------------------------------------

Invest Mutual Funds Online

Transact Mutual Fund Online

 

Download Mutual Fund Application Forms from all AMCs

Download Mutual Fund Application Forms

 

Best Performing Mutual Funds

    1. Largecap Funds:
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    3. Mid and SmallCap Funds
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    4. Small and MicroCap Funds
      1. DSP BlackRock MicroCap Fund
    5. Sector Funds
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    6. Gold Mutual Funds
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

 

Concept of Mutual Fund Systematic Investment Plan (SIP)

Posted: 16 Oct 2012 11:30 PM PDT

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Many investors keep waiting for the markets to come down and a lot of times, markets move in just the opposite direction leaving such investors with no option but to keep their money idle or to invest at even higher levels.

 

Concept

 

Just like a Post office Monthly Recurring Deposit Scheme you pay for 5 years monthly certain amount and get back after 5 year your deposit amount and 8% interest on your investment. If your invested monthly 1000 in Post office RD scheme after maturity (5) you get 78 to 79 thousand .

 

A monthly SIP of Rs 1000 would grow to Rs 21.84 lakh in 15 years

 

What is a Systematic Investment Plan (SIP)?

 

A Systematic Investment Plan (SIP) is a disciplined approach to wealth creation. It allows the investor to adopt a systematic and dedicated approach to financial planning by inculcating a regular savings habit.

 

Instead of investing a large amount at one time, the investor can choose to stagger his investment at regular intervals according to his convenience and ability.

How do you benefit from SIP?

  • Discipline Since you invest regularly, it makes you disciplined in your savings, which leads to wealth accumulation. Disciplined investing is vital to earning good returns over a longer time frame.
  • Power of Compounding SIP helps you to start investing at an early age to meet the greater expenses of your life. Saving a small sum of money regularly makes money work with greater power of compounding with significant impact on wealth accumulation.
  • Rupee Cost Averaging SIP minimizes the effects of investing in volatile markets. It helps you average out your cost by generating superior returns in the long run. It reduces the risk associated with lump sum investments. Since you get more units when the NAV drops and fewer when it rises, the cost averages out over time Thus the average cost of your investment is often reduced.
  • Convenience and Regularity SIP gives you the convenience to pay through Axis Bank Electronic clearance service (ECS) or Auto Debit. You can decide the amount and the mutual fund scheme. A fixed amount will automatically get debited from your account on a date specified by you.

------------------------------------------

Invest Mutual Funds Online

Transact Mutual Fund Online

 

Download Mutual Fund Application Forms from all AMCs

Download Mutual Fund Application Forms

 

Best Performing Mutual Funds

    1. Largecap Funds:
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    3. Mid and SmallCap Funds
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    4. Small and MicroCap Funds
      1. DSP BlackRock MicroCap Fund
    5. Sector Funds
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    6. Gold Mutual Funds
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

 

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