Hybrid funds are the flavour of the season. Thus at one end monthly income plans are in vogue with new launches every month. Those AMCs, which already have one such scheme, are introducing variants with a higher equity allocation of 20 to 25 per cent. On the other hand a number of fund of funds (FoF) have also been launched in recent months. These are also hybrid products as most of the FoF options have varying asset allocation.
The latest hybrid product on offer is Prudential ICICI's Income Multiplier Fund. The scheme will invest up to 30 per cent of the portfolio in equities. During most periods the equity exposure is expected to vary in the range of 20 to 25 per cent.
Seventy per cent of the funds equity component will be invested in Nifty Stocks. The debt component will be managed like a short-term plan. Under current market conditions the fund is targeting an average portfolio maturity of less than three years.
The fund is thus similar to a monthly income plan, except for the higher equity exposure. The higher equity exposure also means higher sector exposure for the Income Multiplier plus viz. a viz. The AMC's MIP (7.5 per cent vs. 5 per cent). Some other differences are that the equity universe of the Income Multiplier is defined while that for Prudential ICICI MIP is left open. Income Multiplier fund will thus effectively invest in large-cap equities, while the MIP can take mid-cap exposure up to 5 per cent of the portfolio
As with all mutual fund schemes having an equity component a long-term investment horizon is essential. With a higher equity allocation the Income Multiplier Plus has a higher risk-return profile than a MIP.
Income Multiplier Fund is open for initial subscription between February 16 and March 5, 2004. The minimum investment in the scheme is Rs 5000 and there is no entry load. Initial issue expenses will be fully borne by the scheme and so every Rupee contributed will be invested. There is no exit load for investments up to Rs 10,00,000. For investments less than Rs 10,00,000 there will be a contingent deferred sales charge of 0.5 per cent. The scheme will offer Growth and Dividend Options. Within the dividend option payout and reinvestment options are also available.
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