Axis and Pramerica has launched their equity funds while Reliance and ICICI are set to launch their closed ended funds on November 15, 2013 and November 18, 2013 respectively.
Fund houses are rushing to launch equity funds as the market revives.
Axis Mutual Fund has launched a five-year close ended equity fund called Axis Small Cap Fund while Pramerica Mutual Fund has launched an open-ended equity fund – Pramerica Midcap Opportunities Fund. The NFO of both funds are currently open and close on November 25, 2013.
Axis Small Cap Fund aims to generate long-term capital appreciation from a portfolio of equity and equity related instruments of small-cap companies. The scheme will be benchmarked against BSE Small Cap Index. Pankaj Murarka will manage the fund.
Pramerica Midcap Opportunity Fund will invest in equity and equity related instruments of mid-cap companies. The fund may also invest a small portion in large and small cap funds. The scheme will charge an exit load of one percent if redeemed within a year. No exit load will be charged thereafter. The scheme will be benchmarked against CNX Midcap Index. B P Singh will manage the fund.
Reliance and ICICI Prudential are also set to launch their close-ended equity funds. Reliance Close-Ended Equity Fund Series A which opens for subscription November 15 will have a five-year lock-in while ICICI Prudential Value Fund Series 2 (opens for subscription on November 18) comes with a three-year lock-in.
Dhruva Raj Chatterji, Senior Investment Consultant, Morningstar India says, “Some fund houses are launching close ended equity fund to check the redemption pressure which the industry has been witnessing for the past one year.”
Industry officials believe that these funds can garner good inflows from investors due to the attractive commission (4-5% upfront) offered on such funds.
“A major section of small-cap and mid-cap indices are trading at significantly lower valuation. Hence, it’s a good time to invest in equity funds having exposure to small-cap and mid-cap equities. Despite decent upfront commissions, we don’t prefer to recommend close ended equity funds with such a large horizon due to liquidity constraints. It’s better to invest in existing equity funds,” says Nikhil Kothari of Etica Wealth Management.
Vishal Dhawan of Plan Ahead Wealth Advisors points out that AMCs want investors to stay invested for long duration so that they can effectively manage the fund without any redemption pressure. He says that the fund houses may convert these close ended funds to open ended fund in future but it is advisable to invest in the existing funds with proven track record.
