A very innovative debt scheme. The Canara Robeco InDiGo Fund will invest in debt and money market instruments (65-90%) and gold (10-35%). InDiGo is a sort of abbreviation for Income from Debt Instruments and Gold.
The debt portfolio will comprise high quality paper (to minimise credit risk), short-term (to avoid duration risk) paper with the focus on generating a steady stream of interest income with a low level of risk. The gold portion will find its way into a gold exchange traded fund (Gold ETF).
The portfolio will be rebalanced every 10 days and the final call on the actual allocation between the two asset classes will be made by the fund manager. The latter will take his cue from seasonal patterns of gold, global and domestic macro economic events, and government policy and Reserve Bank of India (RBI) actions to decide on the actual allocation.
The fund management team has looked at data since 2000 and has narrowed down on periods during the year when India witnesses a heightened demand for gold resulting in an increase in price. These seasonal occasions will be the wedding season, Diwali and Akshay Tritiya. Based on data and performance simulation measures, the product was back tested to arrive at parameters on the change in gold allocation. Higher the potential for monthly change in price, higher the gold allocation. For example, if the monthly change in price is more than or equal to 2 per cent, the gold allocation will be 35 per cent. If the change is less than 0 per cent, the gold allocation would be at its minimum.
This is an interesting offering, to say the least. Investors will not need a demat account, as would be the case if they wanted to buy a Gold ETF. UTI Wealth Builder Fund – Series II is somewhat similar in that it combines gold with another asset (equity). But this one is safer since the other asset in question is debt.
The fund will be managed by Ritesh Jain – Head – Fixed Income. Jain holds a masters degree in Business Economics and has over 11 years of experience in the fixed income markets and asset management. The fund will be benchmarked against CRISIL Short Term Bond Fund Index and price of gold.
The minimum application amount will be Rs 5,000. One per cent exit load will be applicable if redeemed within one year and none if redeemed after that. The new fund offer (NFO) opened on May 19, 2010 and closes on June 10, 2010.
