At present there are eight banking sector schemes. But more important than choosing the right scheme, an investor needs to be cautious about when to invest in a sector fund.
Birla Sun Life Mutual Fund plans to launch an open ended banking & financial services sector scheme. The scheme would invest over 70% of its portfolio predominantly in equity and equity related securities of companies engaged in banking and financial services. The balance of the assets would be invested in cash, money market and debt instruments. If you do not get your timing right, you may face a significant loss of capital or the opportunity of gaining substantial returns.
For example, if one had invested in a banking sector scheme at the beginning of the year, the investment would have gone down by over 20% by the end of September 2013. Below is the chart of the one-year and three-year and five-year rolling returns with quarterly frequency of the CNX Finance index, which is also the benchmark of the scheme.
The returns of banking schemes have also varied considerably. This makes the choice of choosing the right scheme crucial. Reliance Banking is one of the oldest scheme and has accumulated a corpus of Rs1,300 crore, surpassing all the other schemes in terms of assets under management. UTI Banking Sector which was launched in March 2004 has gathered a corpus of just Rs274 crore. From the list, ICICI Prudential Banking and Financial Services is the only scheme that has performed better that the rest in the periods mentioned. However, from the chart it can be seen that the volatility risk is still present.
Birla Sun Life Mutual Fund is one of the better managed fund house. There are 19 schemes of the mutual fund. Some of the equity schemes of the fund company have performed significantly well in the past. Below is the performance of the schemes.
Mahesh Patil would be the designated Fund Manager of the scheme. He has over 22 years experience in fund management, equity research and corporate finance. Prior to joining the fund house, he has worked with Reliance Infocom Ltd. in Business Strategy, and as a Sr. Research Analyst with Motilal Oswal Securities and Parag Parikh Financial Advisory Services. He currently manages four other schemes of Birla Sun Life Mutual Fund—BSL Frontline Equity, BSL Infrastructure, BSL Top 100 and BSL Long Term Advantage
Additional Scheme Details
Fresh Purchase (Incl. Switch-in): Minimum of Rs5,000/- and in multiples of Re1/- thereafter
Additional Purchase (Incl. Switch-in): Minimum of Rs1,000/- and in multiples of Re1/- thereafter
Repurchase for all Plans/Options: In multiples of Re1/- or 0.001 units
Benchmark Index CNX Finance
For redemption / switch-out of units within 365 days from the date of allotment: 1.00% of applicable NAV.
For redemption / switch-out of units after 365 days from the date of allotment: Nil.
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%