With equity markets touching record highs, fund houses seem to have become aware of the importance of long-term investing. Consequently, a slew of new fund offers (NFOs) of close-ended equity funds have hit the markets. Prudential ICICI Fusion Fund (PIFF) is the latest offering in this segment.
Equities as an asset class are best equipped to deliver over longer time frames and close-ended funds promote the same. Close-ended funds ensure that investors stay invested for longer periods (like 5 years in PIFF) and thereby give them the opportunity to benefit from investing in equities.
Similarly, a fund manager managing a close-ended fund can afford to make long-term investment decisions and be indifferent to short-term market fluctuations. This is where he has an edge over a fund manager handling an open-ended fund. Events like redemption pressure could force the latter into making short-term calls and thereby compromise investors' interests.
PIFF is mandated to invest in stocks across market capitalisations i.e. large, mid and small cap stocks. This makes the fund a 'true blue' diversified equity fund with unrestricted access to attractive investment opportunities.
Investors with a flair for high risk investment avenues can consider adding the fund to their portfolios. Also only that portion of their investible surplus which has been reserved for long-term investments should be invested in the fund, given the fund's close-ended nature. Since dividends declared by close-ended equity funds are subject to dividend distribution tax, we suggest investors select the growth option.