In a tough year for equities, few equity funds were launched in 2001. After a long dull phase, Pioneer ITI AMC is launching two innovative equity funds – Asset Allocation Fund and PE Ratio Fund.
The PE Ratio Fund will aims to provide superior risk-adjusted returns through a portfolio of stocks and bonds whose allocation will varying based on the PE Ratio level of the overall market. At its core it will be a disciplined, dynamically programmed index fund with in-built automatic sell-buy mechanism to be triggered by the P/E levels of the NSE Nifty. The fund will also automatically balance its asset allocation based on the P/E ratio of the index. At a relatively higher level of PE ratio of the Index, the fund will have a reduced equity allocation. And at low PE ratios, the allocation to equities will go up to capitalise on the upside potential. By its design, if the PE of the Index is below 12, then the fund will have 70-90% in equities and upto 10 per cent in bonds. With rise in markets's PE, the equity allocation will be reduced and can be as low as less than 10 per cent if PE goes above 28. The equity portion of the fund will be passively managed and will be invested in Nifty stocks in proportion to the weight in the Index, while for debt it will be discretionary selection of bonds.
Pioneer ITI Asset Allocation Plan will maintain its stated asset allocation by disciplined re-balancing of portfolio every month. Asset allocation is the process of reducing risk via maintaining a portfolio spread over variety of asset class and consistently monitoring it. The Asset Allocation Fund will offer a choice of five asset allocation plans with varying stock and bond allocation – Pure Growth (Equity – 90%, Debt – 10%), Steady Growth (Equity – 70%, Debt - 30%), Balanced Growth (Equity – 50, Debt – 50%), Conservative Growth (Equity – 30%, Debt – 70%) and Inflation Hedge (Equity – 10%, Debt – 90%). With predefined weightage to stocks and bonds, the fund will provide a precise asset allocation suited to your objective and risk tolerance through all types of market conditions. Besides periodic realignment of portfolio in a fund is tax advantageous for an investor. If an investor tries to realign his allocation then it will amount to booking profit or losses every month with tax implications.
Fund Update: During the week, the market fell 12 points on the Sensex and 28 points on the broad-based National Index. Funds with cyclical orientation were the key gainers during the week – Alliance Basic Industries (3.08%), Magnum Contra (2.99%), Boinanza Exclusive Growth (2.80%) and UTI Petro (2.74%). Pioneer ITI Pharma (2.12%), Sun F&C Resurgent India Equity (1.83%) and Magnum Pharma (1.65%). And technology funds were big losers – Magnum IT (-6.39%), IL&FS eCOM (-5.92%), Pioneer ITI Infotech (-5.90%) and Birla IT (-5.24%).
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