India’s largest fund house by assets, HDFC Mutual Fund which has so far shied away from launching closed end fund is all set to launch a closed end equity fund.
HDFC MF has recently filed a draft offer document with SEBI to launch a close end equity fund called HDFC Equity Opportunity Fund. The fund house is yet to finalize the tenure of the fund. The draft offer document said that the scheme proposes to offer three plans of tenure ranging between 24 months to 66 months. The duration of the plans will be decided at the time of launch, said the fund house.
A senior official from the fund house said that his fund house has worked out on an investment strategy which can work well in the close end strategy. ‘We have evaluated a strategy which has a potential to deliver better performance in the close end structure. However, we are yet to finalize the launch date,” said the official.
Benchmarked against CNX 500, the scheme aims to generate capital appreciation by investing predominantly in equity related instruments across market capitalization. Srinivas Rao Ravuri and Rakesh Vyas will manage this fund.
Majority of large and mid-sized fund houses like ICICI Prudential, Birla Sun Life, UTI, Reliance, DSP BlackRock, Sundaram, Axis and IDFC have launched closed end equity funds.
The industry has mobilized Rs.15,400 crore from 84 equity fund NFOs in FY 2014-15. Of this, a major chunk of money has come in close end equity funds. Around 58 closed end equity funds collected close to Rs.11,500 crore last fiscal. Most of the closed end funds are focused on investing in mid and small cap stocks. The trend of close end funds started last year with IDFC Equity Opportunities Fund.
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