The scheme seeks to invest funds based on the geographic location of a company. The minimum allocation as a percentage of equity assets to each region (North, South, East, West) would be 15%, while the maximum allocation to each region would be 55%.
The allocation of equity assets to a region would depend upon a number of factors including economic development, market opportunities, changing regulation, flow of investment/ capital to a region, demographic profile, and political and economic factors specific to a region.
Though SBI Mutual Fund believes that SBI One India Fund has a unique investment strategy that makes it stand apart from any other fund, but not everyone is so positive. Experts see it as a gimmick as they feel that any other existing diversified scheme too can have a similar portfolio.
Just another Gimmick
Investment expert Sandeep Shanbhag says, "SBI MF as a fund house has a fairly decent track record and it needn't have resorted to such attention grabbing devices to generate assets under management." "Investors would be better off sticking to existing performing well diversified plain vanilla products rather than getting talked into such strange mutual fund schemes", he added.
Shanbhag also feels that the idea seems to go against the basic tenets of wise fund management in that, investments should go into that stock or company that offers the largest potential of capital appreciation and wealth building, regardless of the region such a company is situated in.
However, Sanjay Sinha, Head -- Equities, SBI Mutual Fund explains the USP (Unique Selling Point) of the new fund: "The unique characteristic of this fund lies in the fact that it will seek a regional diversity in its investment strategy. The performance of model regional portfolios over the last 5 years have brought out the following points:
a) Every year one-region portfolio outperformed the other 3 regions. The difference of out performance between regions in each of the year was significant.
b) There was more than one region that outperformed the BSE 200 index every year and BSE 200 is a relatively tough index to outperform.
Based on these findings the fund will follow a strategy that will seek to allocate higher assets to those regions that will have a higher investment potential and therefore seek to outperform the BSE 200 Index. Dedicated investment teams have been put into place for every region. The performance of the regional asset allocation and of the regional portfolios will be reviewed periodically to ensure that we do not carry underperformance too long."
Liquidity -- A Concern?
Advisor Hemant Rustagi feels that, "Being a closed-ended scheme, the liquidity comes at a price in the form of recovery of unamortized issue expenses." "However, it should not be a dampener for a long-term investor", he added.
SBI One India Fund vs Existing Diversified Schemes
Rustagi feels that, "Regional allocation, after all, may not be a great differentiator as any other existing diversified fund can have a similar portfolio, though without the minimum and maximum caps on regional allocation."
But Sinha counters as he says, "While existing funds could have a regional allocation strategy, we believe that by following a dedicated strategy like this we will have a sharper focus and a more disciplined investment strategy. Portfolio in each region will be constructed on bottom up stock selection approach by a dedicated investment team."
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