These funds aim to provide better than fixed income returns with equity like tax status to investors.
ICICI Prudential and Birla Sun Life have come out with their equity saving funds which dabble in arbitrage, equities and debt market and at the same time provide equity like tax status to investors.
ICICI Prudential Equity Income Fund opens for subscription on November 18 and closes on December 2 while Birla Sun Life Equity Savings Scheme is currently open for subscription and closes on November 25.
ICICI Prudential Equity Income Fund aims to generate regular income by investing significant portion of assets in debt securities and equity arbitrage opportunities. While the fund will allocate 20-40% of the net assets in unhedged equity with no market cap bias, the debt securities and equity arbitrage opportunities will form 60-80% of the portfolio. The scheme will be benchmarked against CNX Nifty (30%), CRISIL Liquid Fund Index (40%) and CRISIL Short Term Bond Fund Index (30%).
In a press release, Nimesh Shah, Managing Director and Chief Executive Officer, ICICI Prudential Mutual Fund said, “ICICI Prudential Equity Income Fund offers a potential for stability and regular income with debt, potential for growth with equity, along with tax efficiency to help investor in achievement of financial goals.”
Similarly, Birla Sun Life Equity Savings Scheme seeks to provide capital appreciation and income distribution by investing in a combination of equity derivatives strategies, arbitrage opportunities and pure equity investments. The scheme is benchmarked against S&P BSE 200 (30%), Crisil Short Term Bond Fund Index (30%) and Crisil Liquid Fund Index (40%). Satyabrata Mohanty and Prasad Dhonde will manage the fund.
“Our fund seeks to provide investors a unique mix of equity stocks, spotting arbitrage opportunities and an actively managed debt portfolio. Given that combination of equity is more than 65%, Birla Sun Life Equity Savings Fund aims to provide investors tax efficient returns with relatively low risk,” said A. Balasubramanian, CEO, Birla Sun Life MF in a press release.
Earlier in September, JP Morgan and Kotak launched similar funds which saw a good response from investors. Both the funds have collected over Rs.400 crore during the NFO period.
Other fund houses like SBI and Reliance have filed draft offer document with SEBI and likely to come out with their NFOs soon.
All these funds will invest a minimum of 65% in equity using arbitrage strategy and the rest in a combination of debt and equity so that they qualify as equity funds for tax treatment.
