- Wealth PMS (50L+)
Issue Price: Rs. 10
Minimum: Rs. 5,000 per investor.
SIP option: Not available
Entry Load: Nil at NFO, 2.25% after three years.
Exit Load: Nil. (Amortised initial expenses will be charged)
Initial expenses: 5% expected (upto 6% allowed)
The idea is that they “focus on all four regions of the country”. They also invest in ADR/GDRs and foreign securities.
I find it weird. It invests equally among Indian “regions”. Meaning what? Many big companies have a pan-India presence, but are headquartered in Mumbai or Delhi. Are they all western companies? And what’s the point of investing in a region specific companies? Is the region a factor in performance at all? I don’t think so. Plus, what do you consider the “region” of a company that is across India? The headquarters, perhaps?
Lets see the top companies in India and see where they are headquartered:
1. ONGC : Delhi 2. Reliance : Mumbai 3. NTPC : Delhi 4. Infosys: Bangalore 5. Bharti : Delhi 6. TCS: Mumbai 7. Reliance Comm: Mumbai 8. Wipro: Bangalore 9. ICICI Bank: Vadodara, Gujarat 10. ITC: Kolkata 11. SBI: Mumbai 12. BHEL: Delhi
In this set, 4 are in the north, 5 in the west, 2 in the south and 1 in the east. If you take even the top 100, there will be a very uneven trend towards the north and west. But most of these companies are pan-India companies!
The offer document says that:
Definition of Regions:
Companies of a region will be defined as those having their:
In the region defined as a group of states and union territories.
This means Tata Steel can be both in Western region (since HQ is Mumbai) or in Eastern region (Jamshedpur unit). That confuses the definition and objective of the fund, which I think makes it exactly equal to a diversified fund. Honestly, attempting to invest equally among regions is a ridiculous idea.
This fund is a lousy diversification concept. I’m not at all impressed, and I will track the performance of this fund after six months to see if a) they are really following their strategy and b) is it making better returns.
Also the fund wants to invest in ADRs, GDRs and foreign securities. Why is a “One India” fund investing in foreign securities?
Fund structure: This is a three year closed end, and initial expenses of 6% are amortised over the period. There is no additional entry load. You can exit earlier than three years, but you must pay the remaining amortised value of the initial expenses. You can’t buy after the NFO for three years – I think this is not a closed “end” fund, but a closed “entry” fund.
Benchmark: The fund benchmarks itself against the BSE 200. This is a fairly lousy benchmark, because it has underperformed every other benchmark in existence (BSE 100, Sensex, Nifty, NSE Junior Midcap etc.) I would request that they compare this fund to the BSE 100 or the NSE 100 instead.
The fund house is good: SBI. But this fund adds very little value, really. Their other funds have done very well- Magnum Global, Magnum Contra, Magnum TaxGain – but I think they have pressure from fund management and distributors to introduce new funds, since the new fund commissions are much more. (nearly 6% vs. 2.25%) But why should you and I pay for that?
Overall I don’t see much difference in this fund from their Magnum Global Fund. Invest in that instead.
Recommendation: Do not subscribe. After three years, you can gauge the performance and enter when it becomes an open ended fund.