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How good is Principal FA Fund?

February 04, 2005

Summary
  • Type
  • Open ended
  • Nature
  • Diversified (Equity)
  • Min. Investment
  • Rs 5,000
  • Facevalue
  • Rs 10
  • Entry Load
  • 2.25% (Maximum)
  • Exit Load
  • 1% (Maximum)
  • Issue Opens
  • Jan 31, 2005
  • Issue Closes
  • Feb 22, 2005


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    More Specials

    Investment Objective

  • To provide capital appreciation and/or dividend distribution by investing in companies from a maximum of six sectors, depending upon their growth prospects and valuation at any given point in time.

    InstrumentsNormal Allocation
    Equity upto 100%
    Debt/Money Marketupto 30%

  • Is this fund for you?

    Principal Focussed Advantage Fund (PFAF) is a high risk - high return investment proposition within the diversified equity funds segment.

    The fund aims to bridge the gap between a typical sector fund and a conventional diversified equity fund by investing its corpus in stocks from 4-6 sectors.

    We at Personalfn strongly believe that sector funds go against the spirit of mutual funds by depriving investors the opportunity to hold a well-diversified holding.

    However informed investors who understand the intricacies of a sector and can time their entry /exit may find investments in sectors funds to be lucrative.

    PFAF offers uninformed investors the opportunity to invest in an equity fund akin to a sector fund without necessitating an understanding of the sector and at relatively lower risk levels.

    Having said that, investors must realise that PFAF would be a far riskier proposition vis--vis a conventional diversified equity fund

    Investors with an appetite for high risk investment avenues can consider investing in the fund; also a 2-3 Yr period should be treated as an ideal investment horizon. Investors who would have otherwise invested in sector funds can consider investing in PFAF given the attractive investment proposition.

    Portfolio Strategy

    PFAF intends to provide capital-appreciation by investing its corpus in select sectors. The fund is likely to be invested in 5 sectors, with the sixth sector being used to build positions when an attractive investment opportunity presents itself; the fund intends to cap holdings in each sector at 25% of the total corpus.

    PFAF will hold between 20-30 stocks in its corpus in tune with its 'focussed-investing' objective.

    The fund is mandated to invest between 70%-100% of its corpus in equities; while up to 30% of the corpus can be invested in money market instruments.

    Fund Manager Profile

    Shyam Bhat is an electrical engineer from VJTI, and has done his Masters in Management Studies from NMIMS, Mumbai. He joined Principal PNB Asset Management Company Private Ltd as AVP (Investments) in May 2004, and manages Principal Growth Fund, Principal Resurgent India Fund among others.

    Prior to joining Principal, Bhat was associated with Tata Mutual, where he was a member of the fund management team, managing equity and balanced funds.

    Outlook

    PFAF's performance is likely to mirror that of sector funds i.e. it is likely to experience bursts of strong growth and phases of intense volatility as well. However the distinguishing factor between PFAF's performance and that of a typical sector fund will be the presence of stocks from multiple sectors.

    Also the mandate to invest a part of the corpus in money market instruments may come to fund's rescue if the markets hit a rough patch.

    If you are an investor who can handle the risks associated with investing in sector funds but shies away from doing so on account of poor/lack of understanding of the sector's intricacies, PFAF could be a good fit in your portfolio.

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