Skip to main content

Mutual Fund Review: DSP BlackRock World Energy Fund

 

If one looked at the one-year return of DSP BlackRock World Energy Fund as on April 30, 2011, it impressed. It was way ahead of the Sensex and Nifty. In fact, it was higher than the category average of most of the equity funds.
 

DSP BlackRock World Energy Fund is essentially a fund of funds (FoF) that invests in two international funds: BlackRock Global Funds - World Energy Fund and BlackRock Global Funds - New Energy Fund. The cumulative result on combining the portfolios of both funds is that one can get an exposure to companies in the energy sector across the entire globe.

 

When the fund was launched in India in July 2009, the allocation between the two funds was much different. Between August and December 2009, the exposure to the New Energy Fund hovered at 30 per cent levels. A sudden and dramatic change took place the very next year. In March 2010, exposure to the New Energy Fund dropped to 4.70 per cent from 26 per cent in the previous month. Since then it has stayed low. But while the allocation to the funds has differed, investors need not fret about large cash exposures. The fund has always been fully invested in the two global funds.

 

Portfolio Construction


In the World Energy Fund, investments are made across the full range of fossil fuel-related companies including oil exploration, refining, marketing and service businesses, coal, and gas. The exposure to each sub-sector varies depending on the energy cycle.


The New Energy Fund invests in companies at the global forefront of developing and commercialising new energy technologies. The fund diversifies across renewable energy (wind, hydro, geothermal); alternative fuels (biodiesel, coal-to-liquids); automotive and on-site power generation (fuel cells, electric vehicles); energy storage (hydrogen storage, flywheels); materials technology (superconductivity); and enabling energy technologies (emissions trading, metering). Intra-sector exposure is also kept diversified.
In the case of both the funds, stock selection is based on primary research and the fund managers follow a bottom-up approach. Company meetings and on-site visits are an important part of the research process and are viewed as essential in understanding management strategy and product development. While the criteria would differ between sectors, the focus is on efficient operating companies, sound financials, strong management and on companies with commercial products (specially in the case of the New Energy Fund).
Having said that, the bottom-up approach is framed by using clear top-down themes and market-related assessments. Top-down factors such as the price and direction of crude oil, the global scenario in terms of economic recovery, government policy, security and diversity of energy supply and environmental pressures are all taken into account, though the weightage given to each factor will depend on the fund in question.


The portfolios tend to be very well diversified and are not seen to take undue risks in terms of very strong bets. Besides the number of stocks, they are even well diversified in terms of sector exposure.


The good thing about such a portfolio is the global exposure. For instance, amongst the top 10 stocks, Anadarko Petroleum Corporation is a US-based company, Talisman Energy is headquartered in Canada while Schlumberger Ltd is a French company. The diversification is not just geographical but even sector oriented. Anadarko Petroleum Corporation is an exploration and production firm. Schlumberger Ltd. provides technology and information solutions to oil companies. US-based National Oilwell Varco is a worldwide leader in the design, manufacture and sale of equipment and components used in oil and gas drilling and production.

 

Before you bit the bullet


This fund is a good option if you want a portfolio exposed to energy-related companies across the world. The brand is extremely well known. As of March 31, 2011, BlackRock's assets under management totalled US$3.65 trillion across equity, fixed income, cash management, alternative investment, real estate and advisory strategies, making it the world's largest asset manager.

Despite the global exposure and the well diversified portfolios, end of the day it is a thematic fund. At Value Research, we have always been consistent in our view on this aspect - limit the exposure to such a product to not more than 15 per cent of your overall equity exposure.

 

Why the hike in crude does not work for Indian companies
The oil and gas industry is broadly divided into Upstream and Downstream. The upstream sector, also referred to as Exploration and Production (E&P), includes the search for oil and gas wells and fields and the subsequent drilling operations. The downstream sector relates to refining, marketing, selling and distribution of the products.


A rise in the price of crude should translate into a profit growth for upstream companies due to increased realisations and for downstream companies by improving refining margins. However, the public sector companies are bogged down by under-recoveries, which are losses incurred due to the selling of petrol, diesel, kerosene and domestic LPG below cost. While oil companies have been free since June 2010 to set the petrol price, decisions on increasing diesel, LPG and kerosene prices are taken after a go-ahead from an empowered group of ministers.


Upstream oil and gas producing companies (ONGC, Oil India, GAIL) are asked by the government to give discounts to the oil marketing companies (OMCs) on the ground that they benefit from an increase in global crude oil prices since their crude is benchmarked to international crude. While downstream refiners-cum-OMCs (Indian Oil Corporation, Bharat Petroleum Corporation Ltd, Hindustan Petroleum Corporation Ltd) bear the first-line impact of the under-recoveries, the net realisations of upstream oil majors are capped because of discounts on crude supplied to the downstream companies.

 

 

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

 

Also, know how to buy mutual funds online:

 

Invest in DSP BlackRock Mutual Funds Online

 

Invest in Reliance Mutual Funds Online

 

Invest in HDFC Mutual Funds Online

 

Invest in Sundaram Mutual Funds Online

 

Invest in Birla Sunlife Mutual Funds Online

 

Invest in IDFC Mutual Funds Online

 

Invest in UTI Mutual Funds Online

  

Invest in SBI Mutual Funds Online

 

Invest in L&T Mutual Funds Online

 

Invest in Edelweiss Mutual Funds Online

 

Popular posts from this blog

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...

ULIP Review: ProGrowth Super II

  If you are interested in a death cover that's just big enough, HDFC SL ProGrowth Super II is something worth a try. The beauty is it has something for everybody — you name the risk profile, the category is right up there. But do a SWOT analysis of the basket, and the gloss fades     HDFC SL ProGrowth Super II is a type-II unit-linked insurance plan ( ULIP ). Launched in September 2010, this is a small ticket-size scheme with multiple rider options and adequate death cover. It offers five investment options (funds) — one in each category of large-cap equity, mid-cap equity, balanced, debt and money market fund. COST STRUCTURE: ProGrowth Super II is reasonably priced, with the premium allocation charge lower than most others in the category. However, the scheme's mortality charge is almost 60% that of LIC mortality table for those investing early in life. This charge reduces with age. BENEFITS: Investors can choose a sum assured between 10-40 times the annualised premium...

Merger of Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 Merger of Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund Tata Mutual Fund has decided to merge Tata Indo-Global Infrastructure Fund with Tata Equity Opportunities Fund, with effect from January 16, 2015.   Investors of Tata Indo-Global Infrastructure Fund can redeem/ switch out units from December 13, 2014 to January 12, 2015 without paying any exit load. For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call Leave a missed Call on 94 8300 8300 Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com --------------------------------------------- Invest Mutual Funds Online Invest Any Mutual Fund Online Download Mutual Fund Application Forms from all AMCs Download Mutual Any Fund A...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now