Pramerica Short Term Income Fund | Value Research Pramerica Mutual Fund launches a short-term fund
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Pramerica Short Term Income Fund

Pramerica Short Term Income fund is an open-ended fund from the Pramerica Mutual Fund stable. The scheme seeks to generate regular returns with moderate levels of risk by investing primarily in a portfolio of debt securities and money market instruments of short-term maturity.

Investment Strategy
Essentially, a short-term investment option, the fund provides the flexibility to counter a dynamic environment through an actively managed portfolio in line with the evolving interest rate scenario. The fund has the flexibility to invest across all securities in debt and money market instruments. The scheme will invest at least 65 per cent of its assets in debt and money market instrument with maturity of up to three years and up to 35 per cent of its assets in debt and money market instrument with maturity not exceeding five years and three months. The scheme has the liberty to invest its corpus in all types of fixed income instruments which offer reasonable levels of returns at moderate levels of risks. Its ambit includes Certificate of Deposit, Commercial Paper, Bill of Exchange, CBLO, Reverse Repo, Treasury Bills, and Non-convertible Debentures.

Fund Manager Performance
Mr. Mahendra Jajoo is the fund manager of the scheme. A commerce graduate and also a Certified Financial Analyst (CFA Institute USA), he has over 19 years of experience in financial services and capital markets. He also manages Pramerica Liquid and Ultra Short Term Bond Fund and the debt portfolio of Pramerica Equity and Dynamic Schemes. Prior to joining Pramerica Mutual Fund, he was working with Tata Mutual Fund as Head-Fixed Income.

Fund Family
Pramerica Mutual Fund was incorporated in May 2010. Since then, the AMC has launched five funds, which include three debt funds, one equity fund and one hybrid fund. The total assets under management of the fund house were Rs 1,108 crore, as on Dec 31, 2010.

Scheme   YTD Return  1-Month Return   3-Month Return   Return Since Launch
Pramerica Dynamic -7.09 -7.09 --  -5.6
Pramerica Equity -10.19 -10.19 --  -8.3
Pramerica Liquid 0.68 0.68 1.93 3.15

Suitability and Recommendation
A short-term income fund can offer good diversification and capital protection in times like now when the equity markets are volatile. These funds provide an opportunity to benefit from higher yields that are currently available due to the recent rate hikes. Since such a fund would invest in debt and money market instruments, returns would generally be steady. Furthermore, such funds are liquid as well.

However, investors must be wary of the risks involved. In the current economic scenario, RBI's key priority is to tame inflation and in order to meet its objective, RBI has adopted tight monetary policies. This has adversely affected the performance of such funds. As per Value Research data, short-term income funds failed to live up to their expectations and gave a return of only 1.34 per cent in the previous quarter.

Besides this, there are many other funds in the same category that have a good record.. Out of these, Templeton India Short Term Income is rated 5-star and UTI Short Term Income is rated 4-star by Value Research. Investors should give priority to funds that have a proven track record.

Scheme Details
New Fund Offer Opening Date: January 27, 2011
New Fund Offer Closing Date: February 3, 2011
Type: Open Ended Income Scheme
Options: Growth Dividend (Payout and Reinvestment)
Minimum Investment: Rs 5,000.
Fund Manager: Mahendra Jajoo
Benchmark: Crisil Short Term Bond Fund Index
Loads: Entry Load: Nil
Exit Load: 0.25% if redeemed within 3 months from the date of allotment.

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