Principal Mutual Fund has launched an open-ended equity fund where investments in equities will be determined by the price-to-earnings levels. It will follow up with another dynamic fund called Principal Dynamic Bond Fund.
Mumbai: Principal Mutual Fund has launched an open-ended equity fund called ‘Principal Smart Equity Fund’. The scheme aims to generate long-term capital appreciation with relatively lower volatility through systematic allocation of funds into equity & in debt and money market instruments. The fund will be benchmarked against Crisil Balanced Fund Index. The scheme comes with dividend and growth options. Recently Pramerica Mutual Fund launched a similar scheme called Pramerica Dynamic Fund which relies on a dynamic asset rebalancing tool (DART) for asset allocation.
NFO Date: 26 November 2010 to 10 December 2010.
Distribution Strategy: According to Sudipto Roy, Business Head of Principal Mutual Fund, the new fund will be marketed in 100 locations in India. The fund will be distributed through all the channels – IFAs, private banks, PSU banks & national distributors.
Empanelled IFAs: Around 20,000
Target Investor type: “The Principal SMART Equity Fund is a fund that follows the basic rule of investing – Buy Cheap and Sell Dear. Not many people are able to do it successfully, which is why you see a disconnect between returns of market and returns of the investor. This scheme does it for you, regularly and automatically, as defined in the scheme information document based on a pre-set P/E ratio levels. This scheme is suited for investors looking for long term investments without worrying about market gyrations,” said Rajat Jain, Chief Investment Officer, Principal Mutual Fund.
Collection bankers: Axis Bank, Kotak Bank & IDBI Bank.
Investment Strategy: The scheme will take a call based on the PE ratio levels. When the market turns expensive the scheme will reduce its exposure towards equity and move to debt and money market instruments and vice-versa.
The following chart explains the scheme’s asset allocation strategy based on P/E levels:
|
Weighted Average PE, Ratio of S&P CNX Nifty |
Equity Component (%) |
Debt Component (%) |
|
Upto 16 |
100 |
0 |
|
Above 16 – Upto 18 |
80 to 100 |
0 to 20 |
|
Above 18 – Upto 20 |
60 to 80 |
20 to 40 |
|
Above 20 – Upto 24 |
30 to 50 |
50 to 70 |
|
Above 24 – Upto 26 |
10 to 20 |
80 to 90 |
|
Above 26 – Upto 28 |
0 - 10 |
90 to 100 |
|
Above 28 |
0 |
100 |
The PE ratio will be arrived at by calculating month-end weighted average P/E ratio of the 50 stocks that constitute S&P CNX Nifty Index.
Exit Load: The scheme carries an exit load of 2% if redeemed before one year, 1% before two years and nil after two years.
Fund Manager: Rajat Jain.
Rajat Jain is the chief investment manager of Principal Mutual Fund. He oversees investments of the Principal Mutual Fund, and is responsible for overall portfolio strategy. He has over 20 years of experience in portfolio management; of which the last 9 years have been with Principal. Prior to joining Principal, he was with SBI Mutual Fund.
Investor Base: As per AMFI data, Principal had 9,03,257 investor accounts with assets under management of Rs 5,641 crore as on September 2010.
New funds on the anvil: On November 11, 2010, it filed an offer document with SEBI to launch Principal Dynamic Bond Fund on 11 November 2010.
