IDBI Diversified Equity Fund

An actively managed fund which will hold a diversified equity portfolio of stocks without a bias to any particular market capitalisation segment.

Summary

Type	An open–ended growth fund	Benchmark Index	S&P BSE 500 Index
Min. Investment:	For Lumpsum -> Rs 5,000 and in multiples of Re 1 thereafter For Systematic Investment Plan (SIP) Monthly Option: Minimum Rs 500 per month for a minimum period of 12 months or Rs 1,000 for minimum period of 6 months Quarterly Option: Minimum Rs 1,500 per quarter for minimum period of 4 quarters	Additional purchase:	Rs 1,000 and in multiples of Re 1 thereafter
Face Value	Rs 10 per unit	Expense Ratio:	For Regular Plan - Upto 2.50% For Direct Plan - Upto 2.00%
Entry Load	Nil	Exit Load:	1% for exit within 12 months from the date of allotment Nil if units are redeemed/ switched out after 12 months from the date of allotment
Issue Opens	March 10, 2014	Issue Closes:	March 24, 2014

 

Investment Objective*

 

The investment objective of the scheme is “to provide investors with opportunities for long-term growth in capital through investment in a diversified basket of equity stocks, debt and money market instruments. The equity portfolio will be well-diversified and actively managed to realize the Scheme objective. However, there can be no assurance that the investment objective of the scheme will be realized.”
 

*Source: Scheme Information Document

 

Is this fund for you?

 

IDBI Diversified Equity Fund (IDEF) is an actively managed fund which will hold a diversified equity portfolio of stocks without a bias to any particular market capitalisation segment and sector(s), in the endeavour to generate opportunities for long-term growth in capital. Thus IDEF, in that sense, is classified as a growth scheme by the fund house.

By investing in companies across market capitalisation segments, IDEF will have an opportunity to capitalise on investment opportunities in respective market capitalisation segment (i.e. large cap, mid cap and small cap) as when they arise; which in turn may enhance the chance of generating alpha for its investors. Likewise being diversified in nature and investing across sectors, risk mitigation may also be possible.

But amid times where the Indian equity market recently clocked an all-time high, portfolio construction could be challenging task because the trail P/E of the market is near stretched levels (at about 18.0 calculated on trail earnings), which in effect has lowered the margin of safety at the time of its launch. Therefore before investing one's hard earned money, it would be imperative to take into account his / her risk appetite and risk tolerance.
 

Portfolio & Investment Strategy

 

As mentioned earlier, IDEF would build its portfolio without keeping a bias towards market capitalisation segment in its endeavour to create wealth for its investors in the long-term. To simply put, the fund would have a mix of large cap, mid cap and small cap stocks in its portfolio in varying proportion depending upon the outlook for the respective market capitalisation segment(s). While picking stocks for the portfolio, IDEF will look into aspects such as the following amongst host of others prior to inclusion and will be monitored on an on-going basis:
 

• Competitive position of the company;
• Earnings growth; and
• Management quality



 

It appears that IDEF will follow a combination of top-down and bottom-up approach. This thus along with the aforesaid will help to identify fundamentally sound companies that have long-term growth potential at reasonable prices while also exploiting short-term trading opportunities that may arise from time to time.

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

Instruments	Allocation Range (%)		Risk Profile (Low / Medium / High)
	Minimum	Maximum
Equity and equity related instruments	70	100	High
Debt and Money Market Instruments and CBLO	0	30	Low to Medium

(Source: Scheme Information Document)  

IDEF will benchmark its performance to the S&P BSE 500 Index. This is the appropriate index to benchmark this scheme since it’s a diversified equity fund investing in equities and equity related instruments across market capitalisations.

 

Fund Manager Profile

 

IDEF will be managed by Mr V. Balasubramanian who is the Head of Equity and Fund Manager at IDBI Mutual Fund. He has over 33 years of experience in the field of finance, of which 15 years in the mutual fund industry and 16 years in banking. Since May 2011 he has been with IDBI Mutual Fund first as Dealer and then moving on to becoming a Fund Manager and Head of Equity. Mr Balasubramanian has to his credit a post-graduation in commerce (M.Com) and a CAIIB from the Indian Institute of Banking & Finance. At IDBI Mutual Fund, Mr Balasubramanian manages IDBI Nifty Index Fund, IDBI Nifty Junior Index Fund, IDBI Monthly Income Plan (Equity portion), IDBI Gold ETF, IDBI Gold Fund, IDBI Top 100 Equity Fund, IDBI RGESS – Series I Plan A and IDBI Tax Savings Fund.

 

Fund Outlook

 

Following a multi-cap approach while selecting stocks for its portfolio, IDEF will be able to tap opportunities as when arise in respective market capitalisation segment. Also, with due to weightage to fundamentals while picking stocks for the portfolio, the risk mitigation seems reasonable, supported with the fact that IDEF being a diversified equity fund which could invest across sectors. However the fortune of IDEF would depend upon timely detection of such opportunities, while it endeavours to create wealth for its investors in the long-term.
 

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