Goldman Sachs Mutual Fund launches CPSE ETF

The new fund offer closes for subscription on March 21.

Goldman Sachs has launched Central Public Sector Enterprise (CPSE) ETF through which the government plans to divest its stake in 10 PSUs.

The new fund offer opens for subscription on March 18 and closes on March 21.

The CPSE Index constitutes of companies like ONGC, Gail India, Coal India, Rural Electrification Corporation, Indian Oil Corporation, Oil India, Power Finance Corporation, Container Corporation of India, Bharat Electronics and Engineers India. The Government of India holds more than 55% stake in these companies.

The government is planning to raise Rs. 3,000 crore from this ETF. The ETF has reserved Rs. 900 crore for anchor investors and the remaining Rs. 2,100 crore is reserved for retail, QIB, and non-institutional investor category.

Retail investors will get a discount of 5% on the market price of the stock. Additionally, retail investors will get one loyalty unit for every 15 units held continuously from the NFO allotment date to the loyalty unit record date. The loyalty units will be offered only to those retail investors who invest during the NFO period.

The ETF, which also qualifies as a RGESS, comes with only growth option. It will invest a minimum of 90% of its assets in securities comprising CPSE Index and a maximum of 10% in debt securities.

The CPSE Index has base date of Jan 01, 2009 and base value of 1000.

Advisors are divided over the performance of this ETF. “I wouldn’t recommend this ETF just because of a discount offered to retail investors. There could be governance issues when it comes to running these companies. There are better opportunities in the market,” said Mukesh Dedhia of Ghalla Bhansali Securities.

Some experts say that this ETF can offer steady returns as the companies have been paying dividends consistently. ““Some of these companies are good. However, we need to see if there are any changes in the constituents of the index,” said M S Shabbir of Sensage Financial Services.

Brijesh Damodaran of Zeus Wealthways said “It is a good product. We will wait and watch how the fund shapes up before recommending it to our clients.”

Gajendra Kothari of Etica Wealth Management is of the view that even if these companies were to benefit from policy measures post-election, the stocks take three to years to yield returns. “The valuations of these companies are attractive but we need to wait to see which government is formed. If mixed government is formed then there can be further policy paralysis.”

Minimum subscription: Rs. 5000 for retail investors, Rs.200,001 for QIB and Rs. 10 crore for anchor investors.

Total expense ratio: 0.49%

Benchmark: CPSE Index

Index composition as on 28 February 2014

Fund Manager: Payal Kaipunjal