Variety in fund schemes

Think big but buy small. Think of disciplined investment but invest only once and then let the fund manager take care of the ‘discipline’ part. These are some of the mutual fund investment themes hitting the market in 2007.

These are early days into 2007, yet there are three new funds to choose from — all close ended and of different flavors – from two fund houses. While Sundaram BNP Paribas Mutual Fund has already launched ‘Select Small Cap’ and ‘Equity Multiplier’ funds, Tata Mutual Fund started SIP Fund. The three funds are targeted at three different types of investors. And Tata MF’s SIP Fund definitely brings in some innovation into the industry.

Sundaram MF ‘Select Midcap’, as the name suggests, would target only the smaller companies with potential to give very high returns.

Obviously the risk of investing in this scheme is higher, so that the target investors for the fund house are those who have some knowledge about the relationship between risks and rewards, and are willing to take some higher risks in expectations of returns higher than frontline stocks.

The fund is already open and fund distributors say has already collected about Rs 100 crore. The fund house will close it earlier than scheduled closing date the moment collections reach Rs 300 crore. Sundaram MF other NFO, Equity multiplier, is a three year close ended scheme with initial flows capped at Rs 500 crore. The scheme will have what the fund house calls a caterpillar portfolio — a gamut of great companies that are unable to find favor with investors because they could take a little longer than usual to give great returns.

In Tata MF SIP Fund, one needs to invest only once. Subsequently, each week a portion of the fund’s corpus will be invested will be invested in the equity market while the balance will remain in less risky debt market instruments. So while at the end of the first month only 2.75% of the corpus will be equities, 97.25% will be in debt and money market instruments. At the end of the 36th month, equity will be 99% but debt just 1%. At maturity, while returns would be tax free, investor would also get the opportunity to shift to Tata MF Pure Equity Fund, without paying entry load.

The fund targets two different types of investors: those who are willing to book some profit at the current historic high market levels, yet would prefer to stay invested in some way; and those first time investors who would prefer to take the fund route, rather than entering directly.