SBI Mutual Fund and Sundaram Mutual Fund have launched 10 year closed end ELSS which come with a minimum lock in of three years.
Fund houses are launching closed end funds in different avatars. SBI Mutual Fund and Sundaram Mutual Fund have launched their 10 year close ended equity funds which offer tax benefits.
SBI has launched SBI Long Term Advantage Series I while Sundaram has come out with its Sundaram Long Term Advantage Series I. Both funds are currently open for subscription and close on January 31 and March 20 respectively.
SBI Long Term Advantage Fund – Series I aims to generate capital appreciation by investing predominantly in equity and equity related instruments. The fund will be benchmarked against S&P BSE 500 Index. Dharmendra Grover is the fund manager of the scheme.
Similarly, Sundaram Long Term Advantage Series I aims to generate capital appreciation over a period of ten years by investing predominantly in equity and equity-related instruments of companies. The fund will be benchmarked against CNX 100 index and will be managed by J Venkatesan.
Both SBI and Sundaram’s scheme come with a mandatory lock-in of three years. Investors can choose to remain invested till the maturity of the scheme.
Fund houses say that close ended funds give adequate time and flexibility to fund managers. Sunil Subramanian, Deputy CEO, Sundaram Mutual Fund said, “We have observed that many investors remain invested in ELSS for at least five years. In our internal survey of retail investors, we have found that many investors want to invest in ELSS for 10 years to grow their wealth. Hence, we came out with this fund. The close end nature will help our fund manager to take long term positions in the market. The fund will invest in stocks which would benefit from ‘Make in India’ project.”
We asked experts whether such funds offer a compelling investment case. Vinod Jain of Jain Investments believes that such funds can perform better if they are managed well, “Ten year closed end ELSS from some fund houses like Birla Sun Life and Franklin Templeton have performed spectacularly well. It depends on how such funds are managed.”
However some financial advisors have a different view. Nikhil Kothari of Etica Wealth Management is of the view that investors should avoid such funds. “The performance of such schemes would be affected if the fund manager moves out. Hence, it is better to invest in existing ELSS schemes.”
Earlier, Birla Sun Life, Franklin Templeton, Tata and Religare Invesco had launched similar schemes.
While a few funds have built an impressive track record, others have not lived up to their expectations.
Let us know your views.
