NFO Review: L&T MIP Wealth Builder Fund (LTMWB)
Oct 05, 2011

Author: PersonalFN Content & Research Team

L&T MIP Wealth Builder Fund (LTMWB)

An Open ended Debt Oriented Hybrid Fund

Summary

Type	Open-ended Hybrid – Debt Oriented (MIP)	Benchmark Index	CRISIL MIP Blended Fund Index
Min. Investment	Rs 5,000 (Growth), Rs 10,000 (Dividend)	Face Value	Rs 10 per unit
Entry Load	Nil	Exit Load *	1% *
Issue Opens	September 27, 2011	Issue Closes	October 11, 2011

* An exit load of 1.0% will be charged if redeemed within 1 year from the date of allotment of units and Nil thereafter.

Investment Objective*

The primary objective is “to generate monthly income through investments in a range of debt, equity and money market instruments”. Income will be distributed only if it is earned by the scheme and there can be no assurance that the objective of the scheme will be realised.

(Source: Scheme Information Document)

Is this fund for you?

Monthly Income Plan’s (MIPs) are predominantly debt investments with a small equity component. They work with the explicit objective of outperforming pure debt investments with the help of an ‘equity push’.

A traditional monthly income plan (MIP) is essentially a debt fund with some flavour of equities. Debt instruments provide the safety and stability of regular income from coupon payments and capital gains, whereas equities provide the chance to earn an extra income through dividends and capital appreciation over a period of time. However, in times of market uncertainty, equities can get very volatile, which may negatively affect the overall portfolio returns.

Alike any other MIP, L&T MIP Wealth Builder Fund (LTMWB) also invests in debt and equities with an objective to earn regular income on investments. This Fund is suitable for conservative investors who want to earn regular income but are ready to take some risk to generate returns in excess of those generated by conventional fixed deposits.

Portfolio Strategy

L&T MIP Wealth Builder Fund seeks to predominantly invest in debt.

The fund is mandated to allocate its assets as under:

Instruments	Allocation Range (% to Total Assets)		Risk Profile High/Medium/Low
Instruments	Minimum	Maximum	Risk Profile High/Medium/Low
Debt and Money Market Instruments (Including securitised debt up to 50% of net assets)	70	100	Low to High
Equity and Equity Related Instruments and/ or Units of equity mutual fund schemes	0	30	High

(Source: Scheme Information Document)

The fund manager would invest a minimum of 70% of LTMWB’s assets in various fixed income instruments. While investing in debt, the strategy would be to maintain a balance between safety, liquidity and return on investment. With a view to maintain low to medium risk, the Scheme may focus on short to medium-term securities. The Scheme shall be actively managed and the Fund Management team may endeavour to generate superior returns whilst moderating credit and interest rate risk. *

In order to generate slightly higher returns, the fund manager would invest upto 30% of its assets in equity and equity related instruments. The Scheme will invest in diversified portfolio of equity and equity related instruments to generate returns. The Scheme will invest in a universe of stocks, which will be identified using the bottom-up approach. The scheme will invest in a portfolio of both value and growth stocks. The strategy will be to build up diversified portfolio of quality stocks, with medium to long term potential. The scheme also proposes to use index derivatives for the purpose of generating returns on idle cash. Index as well as stock options will be used for the purpose of hedging.*

(Source: Scheme Information Document)

Fund Manager Profile

Mr. Anant Deep Katare, Fund Manager is a CFA and holds PGDBA. He also possesses Bachelors’ Degree in Engineering. He has over 14 years of work experience. In his last assignment he worked as an Assistant Vice President – Research with UTI Securities Limited.

Ms. Richa Sharma (Fund Manager- Fixed income) is M.M.S (Finance) and also holds Bachelors’ Degree in commerce. She has over 7 years of experience in fund management, research, dealing and journalism.

Fund Outlook

With major exposure towards debt, LTMWB’s performance will be closely linked to the interest rate movement and the availability of qualitative assets. The fund is being launched at the time when interest rates seem to have peaked. This might work in favour of investors as debt portfolio would benefit from any fall in interest rates. On the other hand, equity market indices have come considerably down from their peak. Valuations have become reasonable. This too might help the fund manager buy fundamentally sound stocks at right valuations.

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