IDFC Infrastructure Fund

IDFC Infrastructure Fund (IIF) is a “thematic” equity fund, showing its confidence towards infrastructure growth story in India.

Summary

Type	Open-ended equity scheme	Benchmark Index	BSE 200
Min. Investment	Rs 5,000	Face Value	Rs 10 per unit
Entry Load	Nil	Exit Load *	1.0% *
Issue Opens	February 14, 2011	Issue Closes	February 28, 2011

* An exit load of 1.0% will be charged if redeemed / switched out within 365 days from the date of allotment of units.

Investment Objective*

The investment objective is to seek to generate long-term capital growth through an active diversified portfolio of predominantly equity and equity related instruments of companies that are participating in and benefiting from growth in Indian infrastructure and infrastructural related activities.

 

*Source: Scheme Information Document

Is this fund for you?

IDFC Infrastructure Fund (IIF) is a thematic equity fund from IDFC Mutual Fund. The investment focus of the fund is guided by the growth potential and other economic factors of the country. The fund intends to invest in companies in the infrastructure sector and companies related to the development of infrastructure sector. Hence the portfolio of IIF, will broadly consists of stocks from sector such as cement, construction, energy, financial services, industrial capital goods, industrial manufacturing, metals, services, ferrous metals, non-ferrous metals, engineering, oil & gas, petroleum products, mining & minerals, transportation and telecom. So broadly, it appears like IIF will invest in anything that comes under the theme of “infrastructure”.

 

IIF will follow a combination of top-down and bottom-up approach of stock picking. The top-down approach will be followed by the fund to understand the strategic direction for sector allocation and the bottom-up approach, will thereafter be used in identifying stocks which are available at reasonable valuations, by conducting fundamental research to understand the quality of management, competitive positioning and growth potentials. Hence by analysis of both the approaches of stock picking, we can say that the IIF will do its stock selection by taking into account the following:

 

• Fundamentals of business
• Future profitability and sustainability
• Quality of management

 

Since IIF is a thematic infrastructure fund, it would follow opportunities style of investing and have a multi-sector portfolio. Also, it is noteworthy that in the process of following top-down approach for sector selection, the fund may show sub-optimal performance if the desired outcome for the sector takes a beating, due to any detrimental factors affecting the economic equations of a specific sector.

 

Portfolio Strategy

IIF’s portfolio will mainly (80%) consist of stocks forming a part of the infrastructure theme, but without any market cap bias. The sector selection will be done by following the top-down approach, whereby the fund manager will identify multiple sectors with good growth potential. In doing so, the fund manager will be guided by the following principles:

 

• Sustainable company profits
• Acquire stocks at reasonable value
• Monitor market interest to ensure consistence performance

 

So, in this process of sector identification, the fund will follow the opportunities style.

The fund is mandated to invest as under:

 

Instruments	Allocation Range (% to Total Assets)		Risk Profile High/Medium/Low
	Minimum	Maximum
Equities & Equity related securities in companies engaged in infrastructural and infrastructural related activities	80	100	High
Debt securities and money market instruments	0	20	Low to Medium

* Investment in derivative may be upto 50% of the net asset of the scheme.

 

Fund Manager Profile

Mr. Kenneth Andrade – Head Investments at IDFC Mutual Fund, is a graduate in commerce. He has around 15 years of experience in equity research and fund management. Prior to joining IDFC Mutual Fund, he was designated as Fund Manager (Equity) with Kotak Mahindra Asset Management Company Limited and was also associated with SSKI Investor Services under Portfolio advisory services.

 

Along with IIF, he also manages IDFC Premier Equity Fund (IDFC-PEF), IDFC Imperial Equity Fund (IDFC-IEF), IDFC Small & Midcap (SME) Equity Fund (IDFC-SMEF) and IDFC Enterprise Equity Fund (IDFC-EEF) and IDFC Strategic Sector (50-50) Equity Fund (IDFC-SS (50-50) EF).

Fund Outlook

IIF being positioned as a thematic fund, IIF will have its penchant towards sectors which are likely to benefit from the infrastructure development in the Indian economy. The fund will invest in stocks without any market capitalisation bias, but the investment focus will be primarily guided by growth potential and other economic factors of the country. However the success of the fund will be closely linked with the unfolding of the infrastructure theme and also the stock specific bets taken by the fund manager.

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Comments

priyanarsighania@ymail.com Feb 22, 2011 This seems to be a very nice investment opportunity. The sector is bound to grow as we need more and more infrastructure facilities. Also their fund manager as per a recent press conference has said that they would target companies whose current Return on Capital Employed is greater than their Weighted Average Cost of Capital. There is a possibility and scenario of rising credit costs, slow growth in order book and low margins consolidation will dominate the theme for some year’s to follow. By the year’s five to ten the companies would be strong enough to generate good results and the investors are likely to start getting good returns. Thus, it seems like a very good choice of investment.

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