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Testing The Water

AMCs are gearing up with NFOs to try-out the market

The Securities and Exchange Board of India (SEBI) has ensured that New Fund Offerings (NFOs) are no longer the profitable propositions for Asset Management Companies (AMCs) that they once were.

In 2006, SEBI disallowed open-ended schemes from charging initial issue expenses from the scheme’s NAV. Till then, taking these expenses from the NAV (which effectively meant getting investors to pay them) was a widespread practice. Following this ruling, only close-ended schemes would be allowed to charge initial issue expenses from investors.

But markets were on a roll and AMCs were not going to let the opportunity to raise their Assets Under Management (AUM) slip. In the last quarter of 2007, with Indian bourses at their peak, 20 new equity funds raised Rs 16,200 crore. Half of them were close-ended, accounting for 68 per cent (Rs 9,397 crore) of the total collection.

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In 2008, SEBI scrapped the amortisation charges for close-ended schemes as well. So, the cost of launching a new fund could no longer be passed on to the investor. If that was not disappointing enough, we had the market collapse too.

But going by the recent launches and the offer documents submitted to SEBI, it now appears that AMCs are going all out once again.

IDFC Mutual Fund (MF) has one in the offing, and has already launched five schemes this year: IDFC Classic Equity Plan B, IDFC Imperial Equity Plan B, IDFC Premier Equity Plan B, IDFC Strategic Sector (50-50) Equity Plan B, and IDFC India GDP Growth.

Reliance MF is fairly aggressive with six in the pipeline, spanning index funds, a fund of funds (FoF) as well as a fund which will invest a minimum of 65 per cent in global equity and a maximum of 35 per cent in Indian equity.

DSP BlackRock MF is looking at expanding its portfolio only by introducing sector-specific funds, that too for investors looking at a global option. In March 2008, it launched the DSPBR Natural Resources and New Energy Fund. The timing could not have been worse and the fund has remained a tiny offering with just Rs 190.31 crore of  AUM, as on April 30, 2009. Now it plans to launch the DSPBR World Energy Fund and DSPBR World Mining Fund, both targeting the energy sector, but with a global tilt. In fact, they are siblings to the existing DSPBR World Gold Fund.

Edelweiss MF launched Edelweiss Diversified Growth Equity (E.D.G.E.) with three plans. Two fund houses launched Shariah schemes while JM MF and Deutsche MF launched two schemes each.

Awaiting Approval
Mutual Fund Name of Scheme Type of Scheme
Baroda Pioneer Baroda Pioneer PSU Bond Fund Open Ended Debt
Canara Robeco Canara Robeco F.O.R.C.E Fund Open Ended Equity
DSP BlackRock DSPBR World Energy Fund Open Ended Equity FoF with a global mandate
DSPBR World Mining Fund Open Ended Equity FoF with a global mandate
Franklin Templeton Templeton Fixed Horizon Fund - Series XIV Close Ended Income
IDFC IDFC Capital Oriented Protection Fund (Series I-III) 3-year Close Ended Debt
IDFC Nifty Fund Open Ended Index Fund
Kotak Mahindra Kotak FMP 370 days Series I Close Ended Debt
Mirae Asset Mirae Asset Short Term Bond Fund Open Ended Debt
Reliance Reliance Target Appreciation Fund Open Ended Equity
Reliance Micro Cap Fund Open Ended Equity
Reliance Index Fund - Nifty Plan Open Ended Index Fund
Reliance Index Fund - Sensex Plan Open Ended Index Fund
Reliance Gold Savings Fund Open Ended FoF
Reliance International Equity Fund Open Ended Equity with a global tilt
Religare Religare Credit Opportunities Open Ended Income
Sahara Sahara Daily Fund Open Ended Debt
Shinsei Shinsei PSU Bond Fund Close Ended Income
Shinsei Industry Leaders Fund Open Ended Equity
Sundaram BNP Paribas Sundaram BNP Paribas Gold Plus Scheme A - Open Ended Equity
Scheme B - Open Ended Hybrid
Scheme C - Open Ended FoF
Tata Mutual Fund Tata Arbitrage Fund Scheme A - Open Ended Income Fund
Scheme B - Open Ended Equity Fund
UTI Mutual Fund UTI Master Gold Fund Open Ended FoF investing in domestic Gold ETFs
UTI Capital Plus Fund Close Ended Income
Source: SEBI website updated as on May 20, 2009

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