Five close ended equity funds had hit the market recently.
The five recently launched close ended equity funds have collected approximately Rs. 1488 crore from investors.
A major portion of the NFO mobilization was by ICICI Prudential Value Fund Series 1 which collected Rs. 643 crore. Sources say that its second series which closed for subscription on December 02 has collected in excess of Rs. 400 crore. Encouraged by the good response, the fund house has filed offer document with SEBI to launch Series 3 & 4 as well.
According to sources, Reliance Close Ended Equity Fund – Series A has collected close to Rs. 231 crore while Axis Small Cap Fund collected Rs 180 crore. Axis received 14000 applications in this fund. The fund will become open end after completion of five year lock in period.
Reliance is likely to come up with a second series of its close ended fund soon, said distributors.
Union KBC Trigger Fund Series I, again a close end fund launched in October collected Rs. 35 crore.
|
Scheme |
NFO collection (Rs. cr) |
|
ICICI Prudential Value Fund Series 1 |
643 |
|
ICICI Prudential Value Fund Series 2 |
400 |
|
Axis Small Cap Fund |
180 |
|
Reliance Close Ended Equity Fund Series A |
230 |
|
Union KBC Trigger Fund Series I |
35 |
|
Total NFO mobilization |
1488 |
The trend of close ended funds started with IDFC’s Equity Opportunity Fund in April 2013. This fund garnered Rs. 240 crore.
Most of these funds aim to invest in mid cap companies and stocks which are available at attractive valuations. Close end funds typically pay the entire three to five year commission upfront.
While close end funds have met with reasonable success going by NFO collections, many distributors are not comfortable recommending such funds to their clients. “History tells us that close end funds have not done well. The close end nature need not necessarily help the fund. If that’s the case then ELSS should perform better than other open end funds. If the valuations are attractive then money should come in existing open end funds as well. Investors will invest in close end funds with an expectation to make money in three years. If market falls then their expectations will not be met. It is like timing the market,” said a Mumbai based distributor who manages assets under advisory in excess of Rs. 300 crore.
“These funds will be listed on the stock exchanges so that investors can get an exit route. However, these funds might be trading at a discount so there are chances of incurring losses. We don’t have any past performance of such funds to show our clients. We are recommending open end large cap funds to our clients,” says a Mumbai based distributor.
Many of the close ended funds launched in the past have either been merged or converted into open end funds.
UTI - Infrastructure Advantage Fund – Series I, a close ended fund, got merged into UTI - Infrastructure Advantage Fund in 2011. Birla Sun Life Long Term Advantage, a close ended fund matured in October 10, 2011 and was converted into open ended fund thereafter. Religare Mid-cap Fund, SBI Infrastructure Fund, DSP Black Rock Micro Cap Fund and Kotak Emerging Equity got converted into open end funds. Most of these funds were launched in 2007 when the markets were at peak.
