The Hindu Business Line : New `flexible' funds give fund managers a freer hand

But investors, who have a wide array of options to choose from, want to play it safe and have a finger in every pie. And mutual fund houses are obliging them. They are rolling out new equity funds that allow fund managers to invest wherever they want — without too many limits.

Earlier, there were internally set investment norms, which fixed the proportion of the portfolio that should be invested in large or mid-cap stocks or particular sectors.

`Opportunities. Across sectors. Across market caps,' is the tagline for the recently launched Reliance Equity Opportunities Fund. The logic behind the launch of this fund, as explained by fund officials is simple: Not all mid-cap stocks have made smart gains in 2004; and nor have all large-cap stocks turned out to be laggards. Nor have all stocks in a sector delivered similar returns.

Hence, there is a need for a fund that is not focused on any particular sector or market-cap range, but can invest freely in stocks of its choice. Incidentally, both the existing funds managed by Reliance set internal limits on their investment mix. Reliance Vision has a 30 per cent cap on mid-cap stocks, while Reliance Growth can invest up to 70 per cent in mid-cap stocks.

Another new offering, the HDFC Premier Multi-cap Fund says that it plans to "swing" its allocations, depending on which set of stocks has better prospects. "Mid-caps and large caps as a group outperform each other at different points of time. This fund will try to add value by increasing allocation to large caps when the outlook for the same is better and vice versa, without the investor having to move money across funds," explains Mr Prashant Jain, Chief Investment Officer of HDFC Mutual Fund.

Mr Jain believes that though mid-cap stocks have sharply outpaced large-cap stocks over the past two years, the sharp divergence may not be sustained in future.

Franklin Templeton's new Flexicap Fund has been a runaway success, although the fund house already has five diversified equity funds in its roster. Each of these has a specific large-cap or mid-cap focus. But the Flexicap Fund offers the fund manager considerable elbowroom. Its exposure to large-cap stocks can swing between 20 per cent and 100 per cent of the portfolio, it can also invest anywhere between 0 and 70 per cent in mid-cap stocks and 0 and 40 per cent in small cap stocks.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
FEMA effect: Govt limits dividend payable to foreign investors on preference shares

New `flexible' funds give fund managers a freer hand

Indian textile exporters eyeing brands in US, EU

Govt to tighten norms for Nidhis

Channels not paying up for cricket footage: DD

Emotive needs drive over 50 pc car purchases: Survey

New fears