156-report on mutual funds- close ended

8/6/2019 156-Report on Mutual Funds- Close Ended

1/20

IBS

Report on Mutual Funds

Close Ended

Administrator


2/20

2

Table of ContentsMutual Fund .......................... ........................... .......................... ........................... ........................... ....... 4

Open Ended Fund ........................... ........................... .......................... ........................... ......................... 4

Close Ended Fund.................................................................................................................................... 4

Advantages of close ended mutual fund .................... ............................ ........................... .................... 5

Risks of close ended mutual fund .......................... ........................... ........................... ......................... 5

Reliance Mutual Fund ......................... ........................... ........................... ........................... .................... 6

Reliance Long term Equity Fund........................... ........................... ........................... ........................... .. 6

Product Features ........................ ............................ .......................... ........................... ......................... 6

USP ..................................................................................................................................................... 8

Limitation ......................... ............................ .......................... ........................... ........................... ....... 8

Portfolio Strategy ....................... ............................ .......................... ........................... ......................... 8

Recommendation ....................... ............................ .......................... ........................... ......................... 9

Reliance Equity Linked Saving Fund Series I .......................... ........................... ........................... ........... 9

Product Features ........................ ............................ .......................... ........................... ......................... 9

HSBC MUTUAL FUND ............................................... ........................... ........................... .................. 12

HSBC Unique Opportunities Fund ........................ ........................... ........................... ........................... 13

Product Features ........................ ............................ .......................... ........................... ....................... 13

USP ................................................................................................................................................... 14

Recommendations.............................................................................................................................. 15

HSBC Small Cap Fund ....................... ........................... ........................... ........................... .................. 15

Product features ......................... ............................ .......................... ........................... ....................... 15

USP ................................................................................................................................................... 15

Limitation ......................... ............................ .......................... ........................... ........................... ..... 16

Recommendation ....................... ............................ .......................... ........................... ....................... 16

UTI MUTUAL FUND ......................... .......................... ........................... ........................... .................. 17

UTI-India Lifestyle Fund ........................ ........................... ........................... ........................... .............. 18

Features ............................................................................................................................................. 18

USPs ................................................................................................................................................. 18

Recommendations.............................................................................................................................. 18

Limitations ........................................................................................................................................ 18

UTI Long Term Advantage Fund - Series II ....................... ........................... ........................... .............. 19

Features ............................................................................................................................................. 19


3/20


4/20

4

Mutual Fund

An investment vehicle that is made up of a pool of funds collected from many investors for the

purpose of investing in securities such as stocks, bonds, money market instruments and similar

assets. Mutual funds are operated by money mangers, who invest the fund's capital and attempt

to produce capital gains and income for the fund's investors. A mutual fund's portfolio is

structured and maintained to match the investment objectives stated in its prospectus. One of the

main advantages of mutual funds is that they give small investors access to professionally

managed, diversified portfolios of equities, bonds and other securities, which would be quite

difficult (if not impossible) to create with a small amount of capital. Each shareholder

participates proportionally in the gain or loss of the fund. Mutual fund units, or shares, are issued

and can typically be purchased or redeemed as needed at the fund's current net asset value

(NAV) per share, which is sometimes expressed as NAVPS. Dividend income from mutual fundunits will be exempt from income tax with effect from July 1, 1999. Further, investors can get

rebate from tax under section 88 of Income Tax Act, 1961 by investing in Equity Linked Saving

Schemes of mutual funds. Further benefits are also available under section 54EA and 54EB withregard to relief from long term capital gains tax in certain specified schemes.

There are two basic types of mutual funds. "Open-ended" or "Open" mutual funds are the most

common type of mutual funds. Investors may purchase units from the fund sponsor or redeem

units at the valuation promised in the fund documents, usually on a daily basis. "Closed-ended"

or "Closed" mutual funds are traded as financial securities, once they are issued, and holders

must sell their units on the stock market to receive their funds back.

Open Ended Fund

A type of mutual fund that does not have restrictions on the amount of shares the fund will issue.

If demand is high enough, the fund will continue to issue shares no matter how many investors

there are. Open-end funds also buy back shares when investors wish to sell. The majority of

mutual funds are open-end. By continuously selling and buying back fund shares, these funds

provide investors with a very useful and convenient investing vehicle.

It should be noted that when a fund's investment manager(s) determine that a fund's total assets

have become too large to effectively execute its stated objective, the fund will be closed to new

investors and in extreme cases, be closed to new investment by existing fund investors.

Close Ended Fund

A closed-end fund is a publicly traded investment company that raises a fixed amount of capital

through an initial public offering (IPO). The fund is then structured, listed and traded like a stock

on a stock exchange. A close-ended mutual fund scheme clearly stipulates the maturity period,


5/20

5

which could be anywhere between 2 to 15 years of time. The investor can make investments on a

close-ended mutual fund scheme as soon as they are issued. Later on, he is free to buy or sell

close-ended mutual fund scheme units when they are listed on the stock exchange.

Once the units are listed on the stock exchange, the market price of the close-ended mutual fund

scheme units could vary depending on factors like:

y The expectations of the unit holdersy Demand for and supply of scheme units

Generally, the units of the close-ended mutual fund schemes are traded on the stock exchange at a price

less than its Net Asset Value or NAV. On nearing maturity, the difference between the scheme unit's

trading price and NAV may narrow significantly. Close ended funds also called closed ended mutual

funds are referred to as financial sureties. Close ended funds or close ended mutual funds are

merchandised in the stock market.

Advantages of close ended mutual fund

There are certain advantages of close ended funds as mentioned below:

y One can avail of the facility of buying closed ended funds at a discount rate.y Discount on the closed ended funds is calculated by ascertaining the difference between NAV

and close ended funds value.

y The main advantage of close ended funds lies in the fact that an individual intending to ownstocks, can avail of the close ended funds at a discounted rate and at the same time possess

quality stocks.

Risks of close ended mutual fund

There are certain risks associated with close ended funds.

y Closed ended funds can change abruptly and drastically.y Closed ended funds are basically ever changing in nature.y Close ended funds should be invested in preferably by veteran investing individuals.y Shares of close ended funds can be discounted to such an extent due to which owner of the

shares are unable to know the actual value of the shares.

In order to understand better about the close ended mutual fund scheme we have analyzed the

schemes of three fund houses. These are Reliance Mutual fund, HSBC Mutual funds and UTI


6/20

6

Mutual funds. We have taken one company from Indian Private sector, one from Government

sector and one a foreign player to understand the different strategies of each company.All the

product features, USP of the product , limitation of the product and recommendation have been

made for each scheme.

Reliance Mutual Fund

Reliance Mutual Fund (RMF) is one of Indias leading Mutual Funds, with Average Assets

Under Management (AAUM) of Rs. 71,094 Crs (AAUM for 31st Oct 08 ) and an investor base

of over 70.68 Lakhs.Reliance Mutual Fund, a part of the Reliance - Anil Dhirubhai Ambani

Group, is one of the fastest growing mutual funds in the country.

RMF offers investors a well-rounded portfolio of products to meet varying investor requirements

and has presence in 118 cities across the country.Reliance Mutual Fund constantly endeavors to

launch innovative products and customer service initiatives to increase value to investors.

"Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management Limited.,

a subsidiary of Reliance Capital Limited, which holds 93.37% of the paid-up capital of RCAM,

the balance paid up capital being held by minority shareholders."Reliance Capital Ltd. is one of

Indias leading and fastest growing private sector financial services companies, and ranks among

the top 3 private sector financial services and banking companies, in terms of net worth.

Reliance Capital Ltd. has interests in asset management, life and general insurance, private

equity and proprietary investments, stock broking and other financial services.

Reliance Long term Equity Fund

(An Close-ended Long Term Equity Scheme.) The primary investment objective of the scheme is

to seek to generate long term capital appreciation & provide long-term growth opportunities by

investing in a portfolio constituted of equity & equity related securities and Derivatives and the

secondary objective is to generate consistent returns by investing in debt and money market

securities.

Product Features

Type : A 36-months close ended diversified equity fund with an automatic conversion into an

open ended scheme on expiry of 36-months from the date of allotment

Investment Objective :The primary investment objective of the scheme is to seek to generate long term capitalappreciation & provide long-term growth opportunities by investing in a portfolio constituted of

equity & equity related securities and Derivatives and the secondary objective is to generateconsistent returns by investing in debt and money market securities.


7/20

7

Asset Allocation/Investment pattern

Under normal circumstances, the anticipated asset allocation would be

Instruments Indicative asset

allocation

Risk Profile

Equity and Equity related Securities 70% to 100% Medium to High

Debt and Money market securities (including

investments in securitised debt)

0% to 30% Low to Medium

An overall limit of 100% of the portfolio value has been introduced for the purpose of equity

derivatives in the scheme.

Options Available:

y Growth Optiony Dividend: Only Dividend payoutBenchmark Index : BSE - 200

Application Amount : Rs 5000 and in multiples of Re. 1 thereafter

LiquidityThe Scheme will offer for Redemption / Switch-out of Units on an ongoing basis at half yearly

intervals at NAV based prices. The Redemption / Switch-out of Units will be available onlyduring the Specified Redemption Period i.e. the first five Business Days immediately after the

end of each calendar half year.After the conversion of Scheme into an open-ended scheme, the Scheme will offer for

Sale/Switch-in and Redemption/Switch-out of Units at NAV based prices on every Business Dayon an ongoing basis.

Load Structure : No Entry Load for Direct Investments w.e.f January 4th, 2008

Entry Load : Nil

Exit Load

Forsubscription

If redeemed/switched beforecompletion 12

months from the dateof allotment

If redeemed/ switchedbetween 12 months - 1 dayand on or before

completion of 24 monthfrom the date of allotment

If redeemed/ switchedbetween 24 months - 1 dayand on or before

completion of 36 monthfrom the date of allotment

Exit Load 4% 3% 2%


8/20

8

Load Structure : On Conversion into open ended scheme

Entry Load : For amt below Rs. 2 crs-2.25%, for amt of Rs.2 crs and below 5 crs-1.25%and for

amt. Rs. 5 crs and above- Nil

Exit Load : Nil

Nomination facility : Available

USP

y The fund shall primarily focus on the small and mid cap stocks. However depending onthe views of the fund manager and market conditions in the interest of the investors, the

fund manager will have the flexibility to select stocks which he feels are best suited toachieve the stated objective.

y The fund will have the flexibility to invest predominantly in a range of Small and MidCap companies/stocks with an objective to maximize the returns, at the same time tryingto minimize the risk by reasonable diversification. However there can be no assurance

that the investment objective of the scheme will be realized, as actual market movementsmay be at variance with anticipated trends.

Limitation

y Investors investing in small/mid caps need to be patient enough as it could be a whilebefore these stocks unlock the potential that is expected of them. So flitting in and out of

these stocks/funds may not be the right way to go about investing in mid caps.

y With regards to Reliance Mutual Fund, we have not been able to get complete clarity onthe investment proposition of some of their funds. For instance, Reliance Vision Fund

until some years ago was predominantly invested in mid caps, while Reliance Growth

Fund was the large cap offering. As things stand today, their investment mandates havereversed, which means Reliance Vision is a large cap fund, whereas Reliance Growth is amid cap fund. The change in their mandates is inexplicable and given that they share the

exactly same investment objective, we have no way to ascertain whether this change isonly temporary or permanent.

Portfolio Strategy

RLTEF has a relatively straightforward portfolio strategy. The fund is mandated to invest 70%-

100% of its net assets in equity and equity-related instruments. According to RLTEF's Offer

Document, the equity investments will be made strictly in the small/mid cap segment. The

market capitalisation ceiling for this segment is Rs 15 bn (Rs 1,500 crores), in other words, the

fund is unlikely to invest in stocks beyond this ceiling under normal market conditions.

However, as the Offer Document mentions, the fund manager can revise the ceiling depending

on the market conditions and invest in stocks outside this universe.


9/20

9

Instruments Allocation Range

Equity and equity-related securities 70%-100%

Debt and money market securities 0%-30%

Moreover, if in the fund manager's view, equity markets are unlikely to perform well and there is

a dearth of investment opportunities, the fund can reduce its allocations to equities and insteadinvest in debt and money market instruments upto 30% of net assets.

Recommendation

It pays to invest in diversified equity funds with a long-term perspective, at least 3 years in our

view. Investing for the long-term is particularly relevant for small/mid caps since, unlike well-established large caps, they take a lot more time to unlock their potential. In fact, we would

recommend that investments in mid caps should be made with a minimum 5-Yr investment timeframe. And over this period, investors should be prepared to witness above-average volatility.

Reliance Equity Linked Saving Fund Series I

(An Close Ended Equity Linked Saving Fund)The primary objective of the scheme is to generate

long term capital appreciation from portfolio that is invested predominatly in equities along with

income tax benefit.

Product Features

Type:10 year Close Ended Equity Linked Saving Scheme

Investment Objective

The primary objective of the scheme is to generate long term capital appreciation from portfolio

that is invested predominatly in equities along with income tax benefit.

Corpus : Rs117.55 crore(September 2008)

Minimum Investment : Rs 5oo and in multiples of Rs 500 thereafer

Entry Load : NA

Exit Load : Nil*

*In accordance with the SEBI (MFs) Regulations, 1996, NFO expenses not exceeding 6% of theAmount mobilized, will be charged to the scheme and will be amortized over a period of 10years. If the investor opts for the redemption before the completion of 10 years, proportionate

unamortized portion of the NFO expenses outstanding as on the date of the redemption shall berecovered from such investor.

Benchmark: - BSE 100


10/20

10

Asset AllocationUnder normal circumstances, the asset allocation under the Scheme will be as follows:

Type of Security % of Corpus (indicative) Risk Profile

Equities 80 - 100 % High

Debt and Money Market Instruments Up to 20 % Low to Medium

The scheme may invest in equity shares in foreign companies, ADRs / GDRs and instrumentsconvertible into equity shares of domestic or foreign companies and in derivatives as may be

permissible under the guidelines issued by SEBI and RBI. As the scheme is governed by ELSSguidelines, such investment will be made, if the ELSS guidelines permit.

Specified Redemption Period/Liquidity

The scheme will offer purchase only during the new fund offer period and the

redemption/switch-out will be available only during the Specified Redemption Period i.e. first

five Business Days on a monthly basis at NAV based prices after an initial lock-in-period ofthree years from the date of allotment.

Options Available:

y Growth Plany Dividend Plan

USP

y The funds collected under a plan shall be invested in equities, cumulative convertiblepreference shares and fully convertible debentures and bonds of companies. Investmentmay also be made in partly convertible issues of debentures and bonds including those

issued on rights basis subject to the condition that, as far as possible, the non-convertibleportion of the debentures so acquired or subscribed, shall be disinvested within a period

of twelve months.

y It shall be ensured that funds of a plan shall remain invested to the extent of at leasteighty per cent in securities specified in clause (a). The scheme shall strive to invest itsfunds in the manner stated above within a period of six months from the date of closure

of the plan in every year. In exceptional circumstances, this requirement may bedispensed with by the Fund, in order that the interests of the assesse are protected.

y Pending investment of funds of a plan in the required manner, the Fund may invest thefunds in short-term money market instruments or other liquid instruments or both. Afterthree years of the date of allotment of the units, the Fund may hold upto twenty per cent

of net assets of the plan in short-term money market instruments and other liquidinstruments to enable them to redeem investment of those unit holders who would seek to

tender the units for repurchase.


11/20

11

Limitations

y The amount invested in the scheme shall be subject to a lock-in of 3 years from the dateof allotment and thereafter redemption will be available only during the Specified

Redemption Period i.e. first Five Business Days on a monthly basis at NAV based prices.

y Reliance Equity Linked Saving Fund - Series I is only the name of the Scheme and doesnot in any manner indicate either the quality of the Scheme or its future prospects orreturns

Recommendations

It pays to invest in diversified equity funds with a long-term perspective, of 10 years in our view.

This is a long period for an investor to invest. In fact, we would recommend that investments inmid caps should be made with a minimum 5-Yr investment time frame. And over this period,

investors should be prepared to witness above-average volatility.


12/20

12

HSBC MUTUAL FUND

HSBC Global Asset Management draws upon a long history of serving clients of the HSBC

Group, tracing its roots back to the foundation of the Hongkong and Shanghai BankingCorporation in 1865. The HSBC Group has identified asset management as a key constituent of

the HSBC Groups wealth management strategy and at HSBC Investments; we have beendedicated to managing assets on behalf of our clients for more than 30 years.

In 1994 the HSBC Group recognized the increasingly global nature of financial markets, would

create the need for a credible global asset management organization to ensure delivery of the bestpossible solutions for clients. In response, the separate regional asset management businesses of

HSBC were unified to create a single powerful investment manager aimed at delivering globalinvestment capabilities combined with significant local expertise.

In 2001, following the integration of CCF and its investment businesses into HSBC, a new

global strategy was launched for asset management. The strategy aimed to create a core

proprietary global investment management business HSBC Asset Management, operatingalongside a series of Specialist investment businesses, namely: Sinopia for quantitative andstructured products, HSBC Specialist Investments for property and infrastructure investments,

and HSBC Multimanager for best-in-class open architecture investments and HSBCAlternative Investments for single-manager hedge fund strategies.

In 2004, following a strong period of growth in HSBCs investment businesses, a new strategywas announced for the investment businesses of HSBC. The strategy is intended to position

HSBC for market leadership in the provision of investment solutions that meet client needs andinvolved a reorganization of HSBCs investment businesses including HSBC Asset Management

and HSBC Investment Management, leading to the creation of: HSBC Investments.

In 2008, HSBC Investments is re-named to HSBC Global Asset Management. The name changeis more closely to align it with Global Banking and Markets (the new name for Corporate,

Investment Banking and Markets).

HSBC Global Asset Management has a global network of dedicated offices in each of theworlds major financial centers. Expert teams in each location are committed to developing and

delivering a broad range of solutions for all types of investor drawing on internal investmentcapabilities when appropriate and external managers as required, through our Multimanagercapability.

We are able to create and deliver solutions for clients through a global network of dedicatedoffices, supported by the HSBC Group network of some 10,000 offices in 83 countries andterritories.

HSBC Mutual Fund

The HSBC Mutual Funds are known for three major factors being summarized in their ownword:


13/20

13

Client Focus

We are the client experts for all investment matters, using our knowledge to provide well-engineered products

We provide client solutions we aim to develop appropriate solutions for clients ratherthan just sell in-house capabilities

People

We are stable yet vibrant, benefiting from the vibrancy brought about by our employeesallowing us to combine the ideas and perspectives of different cultures and of longstanding and new employees

We work in teams emphasizing teamwork by developing empowered, focused teamsbacked by high quality support that allows them to achieve their goals. Our people are

impartial and intelligent We offer leading thinking by investing in and recruiting the most talented people across

our business who deliver creative and thoughtful solutions to the advantage of our clients.

Our Business

We promote transparency using technology and the full range of available media toachieve clear, open and appropriate communication with our clients

We demonstrate longevity by building lasting relationships with our clients anddeveloping new markets with a strategic perspective. We are supported by the Groups

long term vision and our clients trust in our commitment to serving them We are an integral part of the HSBC Group, benefiting from the backing of the HSBC

Group with all its strengths and qualities, giving us the confidence to make strategic

commitments to client relationships and new markets.

HSBC Unique Opportunities Fund

HSBC Unique Opportunities Fund (HUOF) is a 3-year, close-ended equity fund that intends to

invest in stocks of companies facing certain out-of-ordinary conditions but have potential forlong term growth. The Fund aims to invest in companies that have strong fundamentals and

possess growth potential but are either temporarily undervalued or are likely to benefit fromunlocking of value from the culmination of these out-of-ordinary situations that are usually

non-recurring and outside the ordinary course of business. It aims to enhance returns over a

longer period of time by taking on moderately higher risk.

Product Features

Type: 3-year close-ended equity scheme with automatic conversion into an open-ended equity

scheme at the end of 3 years from the date of allotment of units


14/20

14

Investment Objective:

To provide long-term capital growth from a diversified portfolio of equity and equity related

instruments. The focus would be to invest in stocks of companies facing "out-of-ordinary"

conditions like Mergers & Acquisitions, Turnaround/Recovery situations, Out of

Industries/sectors, Employee/Management Buyouts etc.



An overall limit of 100% of the portfolio value has been introduced for the purpose of equity derivatives

in the scheme.

Options Available:

y Growth Optiony Dividend: Only Dividend payoutBenchmark Index: BSE - 200

Application Amount: Rs 5000

Liquidity

The Scheme within 10 working days of the receipt of the redemption request at the Official Points of

Acceptance of Transactions of the Registrar and the AMC. The Fund would endeavor to effectredemption payouts (net of applicable taxes) within 3 business Days under normal circumstances.

Load Structure:

Entry Load: Nil. After conversion into open ended for investments below Rs 5 crores, 2.25%, otherwise

Nil

Exit Load: Nil

Nomination facility: Available

USP

As India witnesses strong economic growth and increased corporate activity, there can bevisible opportunities to profit from out-of-ordinary situations such as restructurings, M& As,turnarounds, new business ideas, etc. The Fund has the ability to take on aggressive positions

with an aim to capitalize on these unique opportunities for long term capital appreciation. Beingclose-ended in nature, it is also likely to protect the investor from the short-term volatility

common to such investments.


allocation

Equity and Equity related Securities 65% to 100%

Debt and Money market securities 0% to 35%


15/20

15

Recommendations

HUOF is likely to prove to be a high risk-high return investment proposition due to two reasons,first is the inherent risk of investing in companies that qualify as unique investment

opportunities, second is the aggressive investment style (in terms of concentrated stock

allocations) that it will pursue under certain circumstances. However, the fund could find an allyin the 35% debt allocation to stem volatility during turbulence in stock markets.

HSBC Small Cap Fund

Product features

Type of Scheme: A close ended Equity Fund for 3 years.

Investment Objective To provide long-term capital appreciation primarily from a diversified

portfolio of equity and equity related instruments of small cap companies.

Options Available:

y Growth Optiony Dividend: Only Dividend payoutDividend Declaration of dividend and its frequency will inter alia depend upon the availability

of distributable surplus. Dividend may be declared from time to time.

Minimum Application Amount : Rs. 10,000/-

Benchmark Index BSE Small Cap Index



USP

y The fundamental investment objective of this Fund is to achieve long-term capital growthby investing primarily in a broad range of smaller Canadian companies. In selecting the

investments for this Fund, the Fund's investment advisor focuses primarily on qualitycompanies in three broad industry segments: Resources, Consumer/Industrial Products


allocation

Equity and Equity related Securities 65% to 100%

Debt and Money market securities 0% to 35%


16/20

16

and Technology. The amount the Fund's investment advisor invests in each of the threesegments is largely a result of the individual stocks it chooses.

y The Scheme may also use various derivative products from time to time, as would beavailable and permitted by SEBI/RBI, in an attempt to protect the value of the portfolio

and enhance Unit holders' interest.

Limitation

y The minimum amount for subscription is really high in comparison to UTI and Reliance.y It is focusing only three broad sectors, that has limited the growth of the fund.

Recommendation

It pays to invest in diversified equity funds with a long-term perspective, of 3 years in our view. This is a

long period for an investor to invest. The find has not mentioned any motive,i.e, whether it is going to

invest in Small cap, Large cap or in equities of some special companies. So the investors should be

informed about these information


17/20

17

UTI MUTUAL FUND

Genesis

Jan 14, 2003 is when UTI Mutual Fund started to pave its path following the vision of UTI AssetManagement Company Limited, who has been appointed by the UTI Trustee Pvt. Limited Co.

for managing the schemes of UTI Mutual Fund and the schemes transferred/migrated from theerstwhile Unit Trust of India.

The UTI Asset Management Company provides professionally managed back office support for

all business services of UTI Mutual Fund (excluding fund management) in accordance with theprovisions of the Investment Management Agreement, the Trust Deed, the SEBI (Mutual Funds)

Regulations and the objectives of the schemes. State-of-the-art systems and communications arein place to ensure a seamless flow across the various activities undertaken by UTIMF.

UTI AMC is a registered portfolio manager under the SEBI (Portfolio Managers) Regulations,

1993 on 3rd February 2004, for undertaking portfolio management services and also acts as the

manager and marketer to offshore funds through its 100 % subsidiary, UTI International Limited,registered in Guernsey, Channel Islands.

Assets Under Management

UTI Asset Management Company presently manages a corpus of over Rs. 44,623 Crores * as on30th September 2008 (source: www.amfiindia.com). UTI Mutual Fund has a track record of

managing a variety of schemes catering to the needs of every class of citizenry. It has anationwide network consisting 103 UTI Financial Centres (UFCs) and UTI International offices

in London, Dubai and Bahrain. With a view to reach to common investors at district level, 1

satellite offices have also been opened in select towns and districts.

We have a well-qualified, professional fund management team, who have been highly

empowered to manage funds with greater efficiency and accountability in the sole interest of unitholders. The fund managers are also ably supported with a strong in-house securities research

department. To ensure better management of funds, a risk management department is also inoperation.

ReliabilityUTIMF has consistently reset and upgraded transparency standards. All the branches, UFCs and

registrar offices are connected on a robust IT network to ensure cost-effective quick and efficient

service. All these have evolved UTI Mutual Fund to position as a dynamic, responsive,restructured, efficient and transparent SEBI compliant entity.


18/20

18

UTI-India Lifestyle Fund

Features

Type: A 3 year close ended scheme with tax benefit.

Investment Objective :The investment objective is to earn long term capital gains from thechanging needs of the Indian consumers along with the tax benefit attached to it

Asset allocation: - 80% in equity and up to 20% in debt

No entry load and no exit load*

for three years

Minimum investment is Rs 5000/- and in multiples of RS 1/-

Minimum lock in period of 3 years after which the fund may be converted to an open ended

scheme

USPs

y Investment in companies which will benefit from changing Indian demographics Indianlifestyles and rising consumption pattern

y Investment in derivatives segment of those companies which will benefit from changingIndian demographics.

y The investment manager will select the securities on a bottom up approach and not investright away when he has cash.

Recommendations

y Since the company is looking for a long term profit the term of the fund should beincreased. The current term is 3 years which could be changed to say 5-6 years.

y The fund could be traded on the stock exchange in order to giving the benefit ofliquidation to the investors when they want it.

y Once the nature of the fund changes to an open ended fund the fund house can give moreoptions like an STP, SWP and SIP etc

Limitations

y The duration of 3 years is very less for an economy like India to grow at the maximumpoint.

y The fund cannot be changed to cash very easily when compared to the other products bythe competitors, the Dates for redeeming the units are as follows: - 21/01/2008,21/07/2008, 19/01/2009, 20/07/ 2009, 18/01/2010, 19/07/2010 which may act negative

for the company.

y There are very less investment options available for investment within the fund


19/20

19

UTI Long Term Advantage Fund - Series II

Features

Type : A 10 year close ended scheme with tax benefit.

The investment objective is to earn medium to long term capital gains along with the tax benefit

attached to it, also focusing on Small cap companies.

Asset allocation: - 80% in equity and up to 20% in debt

No entry load and no exit load*

for ten years

Declaration of NAV on a daily basis but after one year of completion

Minimum investment is Rs 5000/- and in multiples of RS 500/-

USPs

y A fund which aims at saving the amount of tax which are to be paid by the investors atlarge

y It invests in those instruments which have low risk but a guaranteed returnsy Declaration of NAV on a daily basis

Recommendations

y 10 years is a very long time and many such funds convert themselves into an open endedfund on completion of 5-6 years

y There are very less option of investments and also withdrawing the company can comeup with options like STP, SWP etc

Limitations

y Low risk definitely means that the returns will be low. This will definitely pull down theNAV value of the fund.

y Very long lock in period : - investors will not invest for a reason that the company has avery long lock in period of 10 years.


20/20

20

Conclusion

We have noticed there are really few close ended scheme in the market. There is more of demand

for open ended mutual funds due to the ease to enter and exit the fund any time. As a result fund

houses are coming up with more of open ended scheme and less of close ended schemes. In case

of Reliance and HSBC the number of close ended scheme varied from 2 to 4 as in comparison of

UTI which has many close ended scheme. This shows that that the government sector has offered

more of the close ended scheme.

As we are seeing there is a lot of volatility in the market. Due to this reason lot of redemption are

taking place. In this scenario no investor is interested to invest their money for a long period of

time. So the close ended funds are not performing well. Mutual funds like the HSBC Unique

opportunities fund which plans to invest in areas where opportunities to profit from out-of-ordinary

situations such as restructurings, M& As, turnarounds, new business ideas, etc. are riskier. The investor in

this scenario would not want to take risk, owing to the current economic scenario of recession.

We have compared all the small caps scheme of each house in order to maintain a uniform parameter to analyze. We can conclude that in case of UTI the lock in period is 10 year for

earning tax benefit. But due to the high investment period investors have not that much

subscribed. In case of HSBC the minimum amount subscription is high approximately double

also the reputation of HSBC is as such to take more of risk. So at last we will conclude that

reliance has got an Competitive advantage in respect of lock in period and minimum amount of

subscription. Also the initial fund schemes of Reliance have been performing well.

Submitted By

Priya

Kanika Puri

Rasya Chari

Amanjot

Naval TanejaShreyans Bansali

156-report on mutual funds- close ended

Documents