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PSU Funds Gain Steam

As the government powers divestment, AMCs are all set for PSU NFOs

Government’s policy-making has its effect on market behaviour, which has been proven time and again, the latest cases being the crash that followed the tepid Union Budget or after that, the rally that happened when the establishment announced reforms over the course of July. The same also applies to the mutual fund industry too.

The Economic Survey has indicated that the government should divest as much as 10 per cent stake in each unlisted PSU, with a divestment target of raising Rs 25,000 crore annually.

Government’s intensions to divest its stake in various Public Sector Undertakings (PSUs), has raised interest in some fund houses. Mirroring that attention are the impending launches of some new PSU funds.

A couple of fund houses have filed offer documents with market regulator Securities and Exchanges Board of India (SEBI), clearance for which is in the works ,while another fund has launched one already.

Religare PSU Equity Fund, SBI PSU Fund and Baroda Pioneer PSU Bond Fund have filed offer documents with the market regulator -- their status is currently pending. While the first two are equity schemes, the last one is a debt fund. However, taking a fast step forward is the newly-set-up Shinsei MF, which has already launched its PSU fund. It will invest in a portfolio of debt and money-market securities issued by PSUs and nationalized banks.

If one leaves aside Shinsei’s fund, a look at the figures reveal that there were only two such funds in existence, namely Kotak PSU Bank ETF and PSU Bank BeES. There were two other such funds, UTI PSU and UTI Mastergrowth, but they no longer exist independently.

The growth trajectory is almost similar in the two funds that have a history. As of August 6, 2009, one-year returns of Kotak PSU Bank ETF stood at 25.7 per cent, while it is at 25.2 per cent in case of PSU Bank BeES.

The waiting-for-SEBI-clearance Religare PSU Equity Fund will invest in companies in which the Central or state governments have a majority stake, or management control. The fund will primarily be investing its assets in the constituents of the BSE PSU Index -- those PSUs that form a part of the BSE 500 index.

The existing two PSU equity funds are index funds that track PSU Banks Index whereas the new funds from SBI MF and Religare MF that are in the offing are diversified equity that will manage PSU funds, says Business Standard.

Government’s intensions on divestment is all set to become rock solid after the $1.25 billion initial public offering (IPO) of National Hydroelectric Power Corporation (NHPC), India’s biggest hydro-electric power generator, got a huge response from investors today, after it was fully subscribed in no time.