Birla Sunlife's New Fund To Focus On Policy Change, Divestment And Government's Increased Spending On Core Sectors
THE communication revolution has not just made telephone services cheaper, it has also created enormous wealth for shareholders in telecom companies over the decade. This win-win situation will not have happened without sweeping reforms.
There has been better utilisation of available resources and increased participation by the private sector in all sectors that have seen reforms. Reforms, be it the green revolution or the white revolution, have changed lives and opened up vast opportunities. As the government continues its journey on the reforms path in many sectors, investors are being offered an opportunity to participate in the process. A dedicated approach to this opportunity can be found in the new fund on offer from Birla Sunlife Mutual Fund – Birla Sunlife India Reforms Fund.
THE FUND
The investment objective of the fund is to generate growth and capital appreciation by building a portfolio of companies that are expected to benefit from economic reforms, PSU divestment and increased government spending. The fund manager will invest 65-100% of the money in equities and equity-related instruments. Up to 35% of the money can be invested in fixed-income securities and moneymarket instruments. The fund has chosen Ankit Sancheti as fund manager. S&P CNX 500 will be the benchmark for the scheme.
INVESTMENT STRATEGY
The fund will focus on investment opportunities arising out of three contexts. First is the policy change. The fund manager will identify the sectors where policy change is underway. Companies that will benefit from the change in policy will be identified and bought at the right valuations. Second is the popular theme of PSU divestment. In the past, divestment has acted as a key trigger for value unlocking in stocks. Companies that stand to benefit from divestment or new listings at right valuations are the targets for the fund manager here. The third factor is focused government spending in certain areas. This makes the fund manager invest in companies primarily from engineering, real estate & construction, power, telecom, infrastructure, financial services, fertilisers, agro-chemical, irrigation, education and select commodity sectors. The scheme will invest across sectors and without any market capitalisation bias.
A point to note is that the offering is based on the reforms process in India. In other words, the success of the scheme depends on two factors, first the reforms should continue and second the fund manager should get the calls right about the companies that will benefit from the reforms. In India, we have seen the reforms story unfold rather slowly. Though it is an irreversible process, a stable government at the Centre is a must to create a conducive environment for the reform process to go on. Being a slow process, the beneficiaries may take more time to reward shareholders making it a case of patient investing.
FUND DETAILS
To buy into the opportunity you need at least Rs 5,000. The fund does not charge any entry load, though there is an exit load of 1%. Investors have the options of growth, dividend payout and dividend reinvestment in this fund. The new fund offer closes on June 9, 2010.
WHY INVEST?
The fund works the best for those who intend to own a portfolio of shares of companies that stands to benefit from the reforms process in India.
WHY NOT INVEST?
Reforms process — core of this fund — may not unfold as desired, which may in turn lead to sub-optimal performance.
