Peerless Mutual Fund Child Plan

An open-ended Debt Oriented Hybrid Fund from Peerless Mutual Fund

Summary

Type	Open-ended Debt Oriented Hybrid Fund	Benchmark Index	CRISIL MIP Blended Index (85%) + Price of Gold (15%)
Min. Investment	1,000	Face Value	10 per unit
Entry Load	Nil	Exit Load *	1% before 1 year
Issue Opens	March 11, 2011	Issue Closes	March 25, 2011

Investment Objective*

The investment objective of the scheme is “to generate long term capital appreciation through a portfolio of fixed income securities, Gold Exchange traded funds (ETFs) of other mutual funds and equity & equity related Instruments. However, there is no assurance or guarantee that the investment objective of the Scheme will be achieved. The Scheme does not assure or guarantee any returns.”

 

*Source: Scheme Information Document

Is this fund for you?

A Debt-Oriented Hybrid Fund invests in different asset classes but with a major exposure towards debt funds. The debt portion seeks to provide a regular source of income by investing in fixed income securities like debentures and bonds (both short as well as long term maturity).

 

But, to provide that extra zing (in the form of higher returns), such hybrid funds are usually complemented with a dash of equity and equity related instruments. These equity and equity related instruments provide that extra bit of returns in the form of dividends and capital appreciation. But nevertheless one should keep in mind that this dash of equity may have an adverse impact on the portfolio performance during turbulent markets.

 

And last but not the least, to shield the portfolio from inflation a part of the investment corpus is dedicated to gold (through gold ETFs). And interestingly, gold has a low or negative correlation with most other asset classes.

 

A negative or low correlation means that the price changes in gold are independent of price changes in other asset classes like equities and debt.

 

Thus by adding gold to the portfolio, the downside risk (risk of decreasing performance) is minimised.

 

Peerless MF Child Plan (PCP) is a debt-oriented hybrid fund which combines equity and gold ETFs with along with debt funds.

 

Portfolio & Investment Strategy

Being a debt oriented hybrid fund PCP will have a major part of its portfolio allocated towards debt (60% - 80%) instruments, while allocation towards equity and gold will be each upto 35%.

 

Instruments	Indicative Allocation Range (% to Total Assets)		Risk Profile High/Medium/Low
	Minimum	Maximum
Debt of all types of companies and money market instruments	60	80	Low to Medium
Equity and Equity related instruments	5	35	High
Gold ETFs of other mutual funds	5	35	High

(Source: Scheme Information Document)

 

The fund managers of PCP would take into consideration many factors before determining the asset allocation between fixed income securities, equities and gold ETFs. Some of these factors are:

 

• global macroeconomic trends
• government policy and monetary policy actions
• seasonal patterns of gold demand and supply



 

Investment strategy for debt investments:

 

The debt investment strategy would be a combination of top down and bottom up approach.

 

The top down approach will involve study the following factors before taking any investment decision:

 

• Current state of the economy
• Current inflationary trends in the economy and the resultant effect on yields and interest rate movement in the debt market.
• Liquidity flows in the system.



 

Such a study of the above factors will help the fund manager to determine the duration of fixed income securities (short-term or long-term).

 

The bottom up approach on the other hand will help the fund manager to cherry pick individual companies for investment opportunities. This approach will consider the following factors:

 

• Management evaluation
• Corporate governance
• Industry analysis
• Business analysis
• Past track record
• Future plans
• Projections
• Expected returns
• Valuations



 

Investment strategy for gold investments:

 

It is noteworthy that gold has been a classic asset to beat inflation and give a positive real rate of return. It has been and will remain for years to come the most favourable asset in difficult times (economic turmoil) for the global economy.

 

The fund manager will conduct a thorough analysis of the fundamental factors determining demand and supply of gold. Investment in gold ETFs will be guided by pre-set risk management limits and controls for gold ETF investments.

 

Investment strategy for equity investments:

 

PCP would invest in diversified portfolio of equity and equity related instruments. The investment would not have any sector bias and would invest in stocks with predominant exposure to large caps.

 

Also, the fund manager would follow a combination of top down and bottom up approach.

 

The top down approach will be used to determine which sectors or themes will have the potential for high growth or influence the economy. A macroeconomic or a global view will be taken into consideration for this process.

 

Soon after the top down approach, the bottom up approach will be initiated to identify investment opportunities in individual stocks. And stocks would be analysed based on the following basis:

 

• Company Analysis
• Prospects of the industry
• Future plans of the company
• Projections made by the company
• Valuations
• Technical Analysis



 

Hence analysing on holistic basis, PCP has a set investment process involved for all its investment activities.

 

Fund Outlook

Positioned as a debt oriented hybrid fund, PCP will aim to generate a stable portfolio having major exposure to debt segment, followed by investments in large cap companies for its equity segment (which may add a zing to returns). Gold will enable PCP to hedge against the risk of inflation and would safeguard the fund’s equity portfolio during turbulent time of the equity market. Also by investing in gold, PCP would be able to deliver better yield over and above the one generated by investing in debt instruments.

 

Hence, in a way the shocks of volatility would be managed through its hybrid positioning.

 

Fund Manager Profile

For debt segment:

 

Mr. Ganti Murthy has done his Honours in Bachelor of Science and also Masters in Financial Management. He is the Head – Fixed Income at Peerless MF. Mr. Murthy brings with him more than 17 years of experience in fixed income and debt investments. Prior to joining Peerless MF, he was associated with SBI MF as a Senior Fund Manager – Fixed Income.

 

For equity & gold ETFs:

 

Mr. Kaushik Dani has done his B.Com and MBA in Finance. He brings with him more than 13 years of experience in fund management. Prior to joining Peerless MF, Mr. Dani was associated with K.R. Choksey Shares & Securities Pvt. Ltd. as Equity Fund Manager and PMS Head.

 

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