So last week we had the Tata Capital Builder Fund from the Tata AMC stable. This week we have C.U.B from ING Vysya Fund.
Tata Capital Builder is rather self explanatory. To invest in India's growth potential with a focus on FMCG, telecom, engineering and capital goods.
The C.U.B is an abbreviation for Competitive Upcoming Businesses (it won't sound so weird when you realise that they had launched L.I.O.N. sometime back).
This one will focus on pharma R&D, health tourism (people coming here for advanced surgeries as they are 10 per cent that of the cost in the US), clinical research, logistics (air cargo, courier), KPO, branded jewellery, food processing and so on and so forth.
What's special?
Both fund houses insist that the argument of why they cannot buy such stocks in your normal diversified equity fund does not hold ground because each fund caters to a special theme and hence will have a different risk potential and cater to a different investor.
Fair enough. So unless you are looking at adding a new theme to your current portfolio, don't consider these funds. If you have only invested in diversified equity funds till date, you may consider them.
If you have never invested in funds, then start off with a diversified equity fund.
But, if you do invest in them, don't expect them to the move at the same pace as the Sensex or Nifty. Give them more leeway in terms of time frame.
When can you sell?
Another fact to note, both are three-year close ended funds which turn open ended after that.
An open-ended fund allows you to buy and sell units every working day. With a close-ended fund you technically cannot. But, these funds open windows regularly for selling units but with a hefty exit load.
Why close-ended? What the fund houses say is that the lock-in period is to give the fund manager some amount of sure capital to work on and not worry about redemptions.
Without the burden of a volatile corpus, the fund manager is in a better position to take long-term bets. And they both cite Equity Linked Savings Schemes (diversified equity funds with a tax benefit under Section 80C) as an example of good performing funds with a three-year lock-in period.
What they don't say is that this is also a fine way to pass the expenses on to the customer.
Open-ended funds can pass on new fund offer expenses to the investor. This was subject to a maximum of six per cent of the amount raised during the new fund offer period. This expense was amortised over a maximum period of five years. That means this expense amount is distributed over five years and not charged in the first year itself.
According to a SEBI (Securities and Exchange Board of India) regulation earlier this year, open-ended equity funds can no longer do this. They will have to meet the expenses from the entry load itself. This load is a percentage of the amount you invest.
But close-ended funds can amortise the expenses over the life of the fund - in this case, three years. In this way, fund can recover more of the costs from the investor.
But then again, there is no free ride.
Why now?
And yes, why would they launch at this time when everyone is so wary of the market? "The time to invest is when everyone is skeptical," says Paras Adenwala, CIO, ING Vysya Mutual Fund.
As for Ved Chaturvedi, CEO, Tata Mutual Fund, he says that they only launch a fund when they see a need and potential in the market. The state of the market is not of too much concern.
So there you are investor, the ball is now in your court.
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