Mutual Funds
ICICI Prudential Value Fund: A close-ended scheme employing a value investing strategy

While close-ended schemes have an advantage over open-ended schemes, much would depend on the market valuation when the scheme is launched

ICICI Prudential Value Fund plans to launch a close-ended equity scheme—ICICI Prudential Value Fund. Each series under the scheme will have tenure of three to five years from the date of allotment of units. The scheme would invest a minimum 65% of its portfolio in equity instruments. Investments in equity would be based on a value investment strategy. Value investing requires a great deal of skill and experience. Being a close-ended scheme, the fund manager can invest depending on the maturity period of the scheme. In a close-ended scheme, a fund manager does not have to deal with the inflows and outflows of funds from investors as in the case of open-ended schemes.
However, as in the case of all close-ended schemes, much depends on when these schemes are open for subscription and their maturity period.
 

If the markets are undervalued at the time of the open offer of the scheme, it would be a good time to invest. A five year lock-in is a reasonable time for equity investments. However, the market condition at the time of maturity of the scheme can influence returns substantially. If one does not wish to exit from the equities at the time of maturity, if valuation is low, they can transfer their investment to another scheme with a similar objective. 
 

There are a few mutual fund schemes that term themselves as value funds. Each fund house has its own style and approach to value investing. For example, Tata Equity PE Fund invests in stocks which have a trailing PE less than that of the S&P BSE Sensex. Templeton India Equity Income Fund puts higher weightage on stocks with a higher dividend yield. UTI Master Value Fund, values funds on their potential future earnings. ICICI Discovery Fund follows the same strategy as the new scheme and is an open-ended scheme.
 

The fund management of ICICI Prudential Mutual Fund has a decent track record. ICICI Prudential Discovery Fund, which is an open-ended value based scheme, has delivered superior benchmark related performance. Even compared to its peers, the scheme has been at the top in terms of performance. The scheme also has the highest corpus which is over Rs2,000 crore.
 

Below is how the schemes have performed over a one-year, three-year and five-year period:
 


As part of the stock selection process the new scheme proposes to consider parameters like the price-to book (PB) ratio, price-to-earning (PE) ratio, dividend yields of companies within its researched universe and try to identify companies with low PB and PE ratios and which have declared dividends consistently in the past and show a reasonable certainty of declaring attractive dividends in the future.
 

The fund would also look into other quantitative parameters like return on equity (ROE) and return on capital employed (ROCE) to identify stocks which may be available at more favourable valuations when compared with peer group and stocks in the applicable benchmark. Such stocks picked may be a part of the mid-and small-cap universe. Keeping this in mind, the fund managers would diversify to mitigate the liquidity and concentration risks.
 

The fund does not intend to restrict to only value stocks. The fund may also look at stocks which have in the recent past demonstrated significant price appreciation as a result of improved earnings growth or due to some other reasons. Mittul Kalawadia will be the fund manager of the scheme. He has been working with the fund house for the past seven years.

 

Other details of the scheme

Benchmark: CNX 500
 

Minimum Amount for Application: Rs. 5,000/- and in multiples of Rs. 10 thereafter
 

Maximum total expense ratio (TER) permissible under Regulation 52(6)(c)(i) and (6)(a)—2.50%
 

Additional expenses under regulation 52 (6A) (c)* (more specifically elaborated below)—0.20%
 

Additional expenses for gross new inflows from specified cities* (more specifically elaborated below)—0.30%

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COMMENTS

Ramesh Poapt

4 years ago

Performance of close ended eqty schemes is far from appealing.ML should have given data of performance of such existing schemes.It is like locking money for 3/5 yrs.Open ended schemes may score higher in merit.

Equity mutual funds lose Rs2,231 crore and 5.08 lakh folios in September

Sales of equity funds for September 2013 declined to Rs1,996 crore, its lowest since April 2009

After a month of positive inflow, equity mutual fund schemes lost assets during September 2013. The sales of equity schemes gradually declined to Rs1,996 crore in September from Rs3,327 crore in June 2013. While the equity schemes during August received a net inflow of assets on account of lower redemptions, in September, poor sales and high redemptions led to an outflow of Rs2,231 crore. Redemptions increased to Rs4,227 crore during September from Rs2,326 crore in August. The total number of equity folios declined by 5.08 lakh to 3.12 crore during September from 3.17 crore in August.
 

After almost four months, an equity new fund offer was launched. IDFC Tax Saving Fund, an equity linked saving scheme, was able to gather a subscription of Rs20 crore during its offer period. This had a marginal impact on the total sales of all equity schemes.
 

The volatile market conditions may have put off equity investors, but is it the only reason the quantum of equity scheme sales in September is the lowest since April 2009. In April 2009, towards the end of the financial crisis, sales of equity schemes amounted to Rs1,994 crore. In the following month, sales more than doubled to Rs5,752 crore as the market started recovering. However, the market environment now is different. Though markets have been volatile, there has been no severe crash. Yet, there has been an outflow of Rs13,615 crore over the past year, with just three months of net inflows. There certainly is a deeper issue which the industry which the regulator needs to find out and resolve.
 

During September, except for foreign fund-of-funds, all other category of schemes suffered a net outflow of funds. As much as Rs33,910 crore flowed out from the mutual fund industry during the month. The total assets under management of the fund industry declined by Rs20,134 crore, from Rs 7.66 lakh crore in August to Rs7.46 lakh crore in September. Assets of equity oriented schemes increased marginally by 3% to Rs1.62 lakh crore from Rs1.57 lakh crore over the same period, while the Sensex moved up by 4% to 19,380 from 18,620.

 

 

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COMMENTS

Suiketu Shah

4 years ago

It is not that the mutual fund managers donot know how to run a profitable mutual funds.They have the knowledge and expertise.It is their intention which is not for the retail investor which is why equity mutual funds are failing big time with retail investors now.
Intention far supercedes knowledge and ability in any sphere in life.

Best is to follow moneylife mutual fund selection of stocks in their magazine which is far better than any mutual fund.

Suiketu Shah

4 years ago

Mutual funds available in India are best to "be torn off and thrown away".It is better,if one wants to follow mutual funds to follow Moneylife long term portfolio in their magazine and invest accordingly.This is far far far better than any mutual fund where the unemployed agent makes more money than you do.

Nilesh KAMERKAR

4 years ago

The lesson is fairly simple . . . Never scratch, if there's no itch.

Suiketu Shah

4 years ago

Shows even with market rising people donot have faith in mutual funds due to pass misselling by brokers.

Chetan Kadam

4 years ago

This the worst time for investor to get out of equity instruments like mutual funds

Sachin Tendulkar to retire after playing 200th Test match

Tendulkar has informed the BCCI about his decision to quit Test cricket after a glorious career spanning 24 years

Sachin Ramesh Tendulkar, who has been playing cricket for India since past 24 years on Thursday announced his decision to retire from Test cricket after playing his landmark 200th match against the West Indies next month.

 

The 40-year-old Tendulkar, who has not been in the best of form in recent times, has informed the Board of Control for Cricket in India (BCCI), about his decision to quit Test cricket after a glorious career spanning 24 years. He has already retired from the one day internationals (ODIs).

 

In a release issued by BCCI secretary Sanjay Patel, the maverick payer said, “All my life, I have had a dream of playing cricket for India. I have been living this dream every day for the last 24 years. It’s hard for me to imagine a life without playing cricket because it’s all I have ever done since I was 11 years old."

 

“It’s been a huge honour to have represented my country and played all over the world. I look forward to playing my 200th Test Match on home soil, as I call it a day,” he added.

 

Tendulkar thanked the BCCI for its support throughout his career and also for allowing to walk into Test sunset at a time of his choosing.

 

“I thank the BCCI for everything over the years and for permitting me to move on when my heart feels it’s time! I thank my family for their patience and understanding. Most of all, I thank my fans and well-wishers who through their prayers and wishes have given me the strength to go out and perform at my best,” he said.

 

There was intense pressure on Tendulkar to bid adieu to Test cricket after a prolonged form slump and particularly with the advent of a number of young players.

 

Tendulkar’s 200th Test match is most likely to be held at his home ground in Mumbai from 14th November. The Eden Gardens in Kolkata is also a contender for hosting that historic match. The BCCI has not yet announced the venues for the two Tests against the West Indies.

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COMMENTS

pushkar kulkarni

4 years ago

can Sachin justify the cola ads .. he is promoting very unhealthy lifestyle for the sake of money. would perhaps sell his soul for few crores and F' cars?!

cricket is a third world game.

what is his contribution to Indian society ?

ramchandran

4 years ago

His role on the field has been exemplary.
Hope he does something off the field to clennup the rot in which the sport is in (match fixing, spot fixing & what not)

Suiketu Shah

4 years ago

Great career but elections round the corner.

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