AMCs rush to launch equity funds

Recently launched equity funds have mopped up close to Rs. 2167 crore from investors.

Equity is back in favor if the recent flurry of fund launches is anything to go by.

After ICICI Prudential collected a record Rs. 650 crore in its ICICI Prudential Value Fund, there have been a series of close end and even open end equity fund launches.

Most of these close end equity funds are betting on the mid and small cap companies in anticipation  of these companies benefiting once the economy bounces back. “The inflows in existing open end funds is not at the scale which we want. Thus, it is easier to collect money in a NFO framework. The industry is using NFO model to get the asset allocation back to equity. We are seeing an opportunity in the mid and small cap space,” said S Naren, Chief Investment Officer, ICICI Prudential Mutual Fund.

IDFC’s first series of Equity Opportunities Fund which hit the market in April 2013 mopped up Rs. 260 crore. The fund house came up with Series II of the same fund in December which has collected Rs. 300 crore. It is planning to launch Series III this month.

At a time when the industry is seeing unabated redemptions from equity funds, the recently launched equity funds have garnered Rs. 2167 crore from investors.

“We have received good response from investors. We believe it is the right time to invest in market as the valuations are attractive. The economy is showing signs of revival,” said Sunil Subramaniam, Director - Sales and Global Operations, Sundaram Mutual Fund. Sundaram Select Micro Fund Series I and II have together collected over Rs. 100 crore. The Series III installment is currently open for subscription. Sundaram had sought SEBI approval to launch four series of this fund.

Vishal Dhawan of Plan Ahead Advisors says that the spurt of NFOs is due to a combination of reasons. “The manufacturers have seen that investors are ready to lock in money in 10 year tax free bonds. This has given hope that investors can also park the same money in three or five year close end funds. Also, there is an expectation that our economy will revive and the beneficiaries will be small and mid-cap companies. Thus, most of the close end funds are trying to capture this space. Gold has not performed well in the last quarter of 2013 which has helped equities.”

“Equity markets can give good returns over the next few years. There will be some stability after the elections irrespective of which party wins. We have seen some inflows in equity funds recently. The tide seems to be turning which is a good sign,” said G. Pradeepkumar, Chief Executive Officer, Union KBC Mutual Fund.

The encouraging response to close end NFOs has spurred AMCs to bring investors even through open end fund route. Motilal Oswal has come out with MOSt Focused Midcap 30 Fund. The fund is open for subscription and will close on February 17, 2014.

The most recent NFO – DSP BlackRock Dynamic Asset Allocation Fund collected Rs. 479 crore. The fund house received 14300 applications in this scheme. A couple of more fund houses including Principal and Reliance are also planning to launch funds based on asset allocation theme.