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StanChart Classic Fund: Worth a buy?
July 12, 2005
|Type||Open-ended equity (diversified)||Benchmark||BSE 200|
|Min. Investment||Rs 5,000 ||Face Value||Rs 10 |
|Entry Load||2.25% (waived off in SIP)||Exit Load||Nil|
|Issue Opens||June 27, 2005||Issue Closes||July 14, 2005|
To generate long term capital growth from a diversified portfolio of predominantly equity and equity-related instruments. There is no assurance or guarantee that the objectives of the scheme will be realised and the scheme does not assure or guarantee any returns.
Standard Chartered Classic Equity Fund (SCCEF) is the maiden diversified equity fund offering from Standard Chartered Mutual Fund (Stanchart Mutual Fund), a fund house that offered only debt funds until now and was proud of the fact that it did not invest a single rupee in equities.
Investing in SCCEF, a new fund from a different AMC, makes sense for investors from a diversification perspective at the AMC (asset management company) level.
However, there is a question mark on Stanchart Mutual Fund's fund management prowess on the equity side. The fund is yet to prove its competence in managing equities; something that is untested even in the global context since SCCEF is the first equity fund that Standard Chartered has launched across countries.
SCCEF proposes to pursue a fund management approach that embraces several styles of investing like growth and value. They also propose to invest across the market cap spectrum into large caps and mid caps. The fund will pursue a bottom-up investment approach. This means that it will invest primarily in companies that meet its investment parameters, and only then factor in the sectoral/industrial, economic and political factors affecting those companies.
|Equity and equity-related securities (max.)||100%|
|Debt and money market (max.)||35%|
|Securitised debt (max.)||35%|
The fund house has traditionally had processes in place to ensure it minimises risk in its debt investments. Likewise, a set of processes and systems have been put in place on the equity side to lower risk. For instance, the fund has capped investments on individual stocks at 8% (of net assets) and no more than five stocks can individually have more than 5% allocation. Likewise, the fund has set up systems to ensure that its sectoral risks are also capped, as also investments in illiquid assets. These measures will ensure that the fund is well-diversified across stocks and sectors.
The fund will aim at building a core portfolio to generate capital appreciation over the long-term, while a portion of its assets will target medium-term growth.
Rajiv Anand is Head-Investments at Standard Chartered Mutual Fund. He worked in HSBC's treasury department for four years and was also associated with Standard Chartered Grindlays Bank for three years, before finally shifting to Standard Chartered Mutual Fund.
Without a track record in managing equities, it is difficult to comment on SCCEF's likely performance. However, given the strong process-led fund management style, we can comment on its ability to generate a risk-adjusted return. A strong focus on diversification across stocks and sectors, will enable it to minimise volatility, something that concentrated funds find difficult to avoid.
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