Reliance Mutual Fund has launched its new fund offering, Reliance India Opportunities Fund – Series A on September 7, and will be open for subscription till September 21. It’s a close-ended fund and will have a tenure of 1,222 days from the date of allotment of units. The face value of the new issue will be Rs 10 per unit.
Timing wise, the fund launch happens as the rupee is falling against the dollar and fuel prices have been moving up. As a result, equity markets are a little edgy. For a close-ended equity fund offering, this is a good time!
Close-ended funds are akin to some sort of market timing. Hence, a falling market may be good for such a product in terms of investments. This offering must be judged on what it promises. Focus on high growth, and high-quality businesses available at reasonable valuations are important. Markets may rise or fall, but the focus on quality always pays off in the long-term. The fund offering is suitable for investors who believe that fund manager Sailesh Raj Bhan (deputy CIO – equity investments) will be able to exploit mispricing opportunities profitably.
The fund aims to build a portfolio P/E that is potentially much lower (cheaper) than markets or benchmark indices. The fund wants to focus on higher earnings growth profile aiming for better than market growth. It is going to be a high conviction portfolio, which will focus on only 25 to 30 stocks.
The fund manager is betting on GARV — an acronym for high growth, high-quality businesses available at reasonable valuations. The focus on ‘value’ is very clear at a time when Indian markets seem priced a tad expensive versus historical averages. The fund manager does not want to overpay for growth.
A well-diversified structure across themes/ sectors (the fund aims to have exposure to at least 5 – 7 sectors) should serve it well.
Also, the fund is keen on investing approximately 50% of the money in shares of market-leading companies.
Stock/sector approach – The portfolio will focus on stock specific investment approach. Allocations may include some of the themes like Financials, Energy, Healthcare, Engineering, etc.
Benchmark: The performance of the scheme would be benchmarked against S&P BSE 200 Index.
Tenure – 1,222 days from the date of allotment of units.
Minimum application amount – Rs 5,000 and in multiples of Re. 1 thereafter.
Load structure – Exit load is nil. Since the scheme shall be listed on BSE or any other recognised Stock Exchange, exit load shall not be applicable.
The RupeeIQ take – All new fund offerings are green-horns. This is because the fund has no track record. Yet, a fund is nothing but the reflection of a fund manager’s process and guile. Sailesh Raj Bhan is an experienced fund manager with a good record. Bhan manages the consumption, pharma, large-cap and multi-cap funds of his fund-house. The ability to deliver returns in a close-ended structure is not as challenging as it sounds if the fund manager has already selected the initial basket of investment-worthy stocks. It will be interesting to see how the fund delivers upon its GARV philosophy, given that it has a legacy of ‘growth’ and ‘momentum’.
Disclaimer: This article is only for informational purposes. Investors should discuss with their financial advisor the scope of having this fund in their equity fund portfolio.