DSP Merrill Lynch Natural Resources and New Energy Fund

DSP Merrill Lynch Mutual Fund has launched an open-end sector fund - DSP Merrill Lynch Natural Resources and New Energy Fund. The fund will invest in shares of domestic and foreign natural resource and energy companies. The investment ambit will include companies in areas of energy, mining and the alternative energy across the value chain - discovery, development, production and distribution. The foreign allocation of the fund will be invested in MLIIF World Energy Fund & New Energy Fund. Both funds were launched in April 2001 and have delivered a return of about 25% pa in the past 5-years.

Performance of Fund Manager
Anup Maheshwari and Aditya Merchant will manage the domestic allocation of the fund. Anup is an old hand with DSP Merrill Lynch since 1997 and currently responsible for two other equity funds -- DSPML Tax Saver and DSPML Opportunities. Aditya Merchant has joined DSPMLFM as a Manager with the Equities team in November 2007.

Similar Funds
There are four other funds in India with similar objective. These include Reliance Natural Resources fund, UTI Energy, Reliance Diversified Power Sector and Sundaram BNP Paribas Energy Opportunities. Three of these four funds are new and only the Reliance Diversified Power fund has a meaningful and a compelling performance track record - 57% p.a. since its launch in April 2004.

Performance of the AMC
DSP ML manages significant equity assets. Four of its equity funds are over three year old, rated highly on a risk-adjusted rating. The T.I.G.E.R. Fund is rated a 5-star while Opportunities, Equity Fund and Top 100 are 4-star funds. The AMC has been selective in launching new funds. It launched the DSPML Micro-Cap Fund in May 2007 and World Gold Fund in August 2007.

Opinion
This new fund has a strong investment case for limited investment. The added dimension of foreign allocation through two funds with a strong performance history add to its attractiveness. However, investors should keep in mind the risks of investing in a sector fund. Sectors funds are good vehicle of targeted diversification but essentially lack real diversity, hence tend to be more volatile.

Scheme Details
Issue opening date : March 3, 2008
Issue closing date : March 27, 2008
Fund category : Equity Specialty
Fund manager : Anup Maheshwari, Dhawal Dalal and Aditya Merchant
Type : Open Ended
Benchmark : 35% BSE Oil & Gas, 30% BSE Metals and 35% MSCI World Energy (net and expressed in INR)
Minimum investment : Regular Plan - Rs. 5000, Institutional Plan: Rs. 5 crore.

Load structure
No entry load on applications for investment to AMC. Applications through distributors will carry the following load:

Regular Plan
Entry Load : 2.25% for investment of less than Rs 5 crore
Exit Load : For holding period for less than six months then one percent, greater than or equal to six months but less than one year, 0.50 percent.

Institutional Plan
No-load