The NFO - Templeton India Corporate Bond Opportunities Fund is an open ended income fund. The new fund offer (NFO) is priced at Rs 10 per unit and will be open for subscription from 15 November to 29 November 2011 and then reopen on 8 December 2011.

The investment objective of the scheme is to provide regular income and capital appreciation through a focus on corporate securities.

The fund would invest in Debt & money market securities issued by private sector corporate and Public Sector Undertakings including banks, financial institutions, Non-Banking Financial Companies: 65%-100% (including securitised Debt (ABS, MBS, single loan) up to 50%); CBLO and T-Bills: 0%-35%.

The fund offers two options viz. growth and dividend plan. The dividend plan will have reinvestment and payout options.

While the theme of this fund is favourable at the current scenario as the interest rates are at a high and about to peak out, the fund has no past track record as such.

And as the fund intends to hold exposure in corporate bonds, along with PSU bonds which may be highly rated, its exposure to private sector corporate bonds may have low rating, which may increase its credit risk.

Also the intended duration of the scheme is not clear, so we believe the duration of the fund to range from low to medium to high maturity instruments based on the fund managers view on the interest rate movement. The interest rate risk of the fund will depend on the average maturity of the fund’s portfolio that the fund managers will hold in future.

The other limitation about the fund is its high Exit load if one intends to exit before 30 months. The part of the gains made by the fund may be lost in the form of high exit load if one intends to exit in case of immediate fund requirement. So investing in this fund would only make sense if one intends to strictly hold it for over 30 months, but with a caution that there is no track record to judge its past performance. Hence this fund is strictly suitable for investors with moderate risk appetite for an investment horizon of at least 30 months.

While the Entry load charge will be nil for the scheme. Exit load charge of the scheme will be as follows: 3% if redeemed within 12 months from the date of allotment, 2% if redeemed after 12 months but within 24 months from the date of allotment, 1% if redeemed after 24 months but within 30 months from the date of allotment.

The benchmark index of the fund will be Crisil Short Term Bond Fund Index.

The fund manager of the scheme will be Umesh Sharma and Sachin Padwal - Desai

Instead of investing in this fund, we at PersonalFN suggest investors to consider investing in a well-established income fund with a proven track record. Invest in an income fund which is well managed and has shown consistency in performance and has enough portfolio flexibility that can help it perform across interest rate cycle.

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readers@allaboutarunachal.com Dec 16, 2011 Yours is the intelligent approach to this issue.

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