NFO Review :Goldman Sachs India Equity Fund
Oct 25, 2012

Author: PersonalFN Content & Research Team

Goldman Sachs India Equity Fund

An open-ended diversified equity scheme seeking to generate long-term capital growth from an actively managed portfolio

Summary

Type	Open-ended diversified equity scheme	Benchmark Index	S&P CNX 500 Index
Min. Investment: Additional purchase:	For lump sum -> Rs 5,000 and in multiples of Re 1 thereafter For Systematic Investment Plan (SIP) -> Rs 1,000 for monthly frequency and in multiples of Re 1 thereafter for minimum 12 instalments Minimum amount of Rs 1,000 and in multiples of Re 1 thereafter	Exit Load	1%*
Entry Load	Nil	Face Value	Rs 10 per unit
Issue Opens	October 17, 2012	Issue Closes	October 31, 2012

* An exit load of 1.0% will be charged if the units are redeemed or switched out on or before completion of 1 year from the date of allotment of units.

Investment Objective*

The investment objective of the scheme is “to seek to generate long-term capital growth from an actively managed portfolio primarily of equity and equity related securities.”

There can be no assurance or guarantee that the investment objective of the Scheme would be achieved.

(Source: Scheme Information Document)

Is this fund for you?

Goldman Sachs India Equity Fund (GSIEF) is an actively managed diversified equity fund, from the stable of Goldman Sachs Mutual Fund, being linked to S&P CNX 500 index as its benchmark. Being a diversified equity fund, GSIEF has the freedom of investing across stocks and sectors within the universe of the S&P CNX 500 index, without holding a bias towards any market capitalisation segment. The fund will attempt to identify companies, which are fundamentally sound or are depicting improving fundamentals; and to do so the fund will resort to fundamental research. Also in order to hedge the fund’s portfolio from time to time, derivatives may also be used.

Reckoning that investing in equity and equity related instruments entails risk, the Asset Management Company (AMC) i.e. Goldman Sachs Asset Management (India) Private Ltd., intends to follow a risk control mechanism to monitor the funds. But having said that, GSIEF is intended for investors who can accept the risk associated with equities.

Portfolio Strategy

GSIEF for building its portfolio will adopt the bottom-up approach of investing, wherein the stocks would be selected primarily based on fundamental research. In order to mitigate the risk while investing in stocks, the fund intends to hold a well-diversified portfolio of companies with sound or improving fundamental, and without keeping a bias towards any specific market capitalisation segment. The companies will be carefully selected based on:

Detailed evaluation industry;
Business model; and
Management

GSIEF intends to pick stocks that are trading at a substantial discount to portfolio manager’s estimate of intrinsic value, and follow the blend style of investing.

Moreover while trying to achieve its investment objective; the fund may also take exposure to derivatives (not exceeding 30% gross exposure to the net asset of the scheme) for hedging and portfolio rebalancing purpose.

The asset allocation which will be followed by the fund will be as under:

Instruments	Allocation Range (%)		Risk Profile High/Medium/Low
Instruments	Minimum	Maximum	Risk Profile High/Medium/Low
Equity and equity related securities	80	100	High
Debt and money market securities (including cash & cash equivalents)	0	20	Low to Medium

(Source: Scheme Information Document)

Fund Manager Profile

GSIEF will be managed by Mr Prashant Khemka (40 years of age), who holds 14 years of experience and has to his credit a CFA charter, a MBA (from Owen Graduate School of Management, Vanderbilt University) and a Bachelors degree in Engineering (from Sardar Patel College of Engineering)

Prior to joining Goldman Sachs Asset Management (India) Private Ltd. (in 2008), he worked with Goldman Sachs (India) Securities Private Ltd. for a couple of years (from 2006 to 2008) and prior to that in Goldman Sachs Asset Management, New York (from 2000 to 2006) and State Street Global Advisors (from 1998- 2000). So, he has fairly a long stint of over a decade with the Goldman Sachs group.

Fund Outlook

The launch of the fund has come at when the sentiments in the Indian equity markets are slightly better than what we witnessed a few months ago, where consolidation with a negative bias was seen. At present, the Indian equity markets are down about 12.0% from their last peak of 21,004.96 points (made on November 5, 2010), which gives the fund manager some opportunity to undertake value buying. But, given the fact that global markets are feeling the shivers of sovereign rating downgrades and economic forecast being tapered, the downside risk to GSIEF cannot be ruled out. However if the RBI reduces policy rates by 25 basis points (bps) and industry sentiments are uplifted, the fund may derive the benefit from the same. Thus, while the opportunities for the fund manager may be galore, the economic and political risk looming makes it risky.

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