Thursday 21 February 2008

Review: Tata Growing Economy Infrastructure Fund NFO

Tata has come out with its so called Tata Growing Economy Infrastructure Fund. The fund is in the NFO period and it closes on 18th March 2008.
The Tata Growing Economy Infrastructure Fund, is said to invest in the so called Growing economies or emerging markets, a concept that I could never understand. India has been growing since independence, so are Brazil, Russia, China, Thailand, South Africa, blah, blah, blah, blah.

They are expected to invest in these so called growing economies and the infrastructure companies of these growing economies. They have namely 2 plans and styles in which your money will be betted upon, details of these 2 plans, A & B are included below.

So if an investor believes that the Tata Fund Money managers will be able to pick out the best performing stocks of the future in the infrastructure sector that too at a world level, then go for this fund NFO.

However, with so many infrastructure funds in offering currently, and so many in the pipeline, I could not understand how can TATA fund management have a heavy entry load of 3% that too on a minimum investment amount of 10,000. The usual conventional NFO’s will have 2.25% as entry load and a minimum investment amount of 5,000 only. Probably, the Tata Fund management believes firmly about their stock picking skills and they are much more confident about the response by investors to their fund.

Here are the fund details:
Name of the FUND: Tata Growing Economies Infrastructure Fund: (open-ended equity scheme – meaning any no. of the units can be created and redeemed based upon the demand and supply).

Price Rs. 10/- per unit with applicable loads during the NFO New Fund Offer.

Minimum Investment Amount (Both Plan A and Plan B): Rs. 10,000 and in multiples of Re. 1 thereafter.

Investment Variations:

  Plan A:
Investment objective of the scheme is to generate capital appreciation / income by investing predominantly in equities of companies in infrastructure and other related sectors in the growing economies of the world and in India..

  Plan B: Investment objective of the scheme is to generate capital appreciation / income by investing predominantly in equities of companies in infrastructure and other related sectors in India and other growing economies of the world.

Prescribed Investment Style:
  Plan A:
Equity and Equity related instruments of companies engaged in infrastructure and infrastructure related sectors (in growing economies other than India: 51% - 70%; in India: 30% -49%), Other domestic equities, Debt & Money Market Instruments: upto 19%.

  Plan B: Equity and Equity related instruments of companies engaged in infrastructure and infrastructure related sectors (in India: 65% - 85%; in other growing economies other than India: 15% - 35%), Other domestic equities, Debt & Money Market Instruments: upto 20%.

Two Options for Investment: Dividend Option and Growth Option.

Applicable Load Structure: Entry load is very very heavy: For each investment amount less than Rs. 2 crores: 3%, for each investment amount greater than or equal to Rs. 2 crores: NIL. Now 3% is not a small amount of money, if you have to invest a minimum of 10,000

Exit Load: For each investment amount less than Rs. 2 crores: 1%, if redeemed on or before expiry of 12 months from the date of allotment. NIL if redeemed after 12 months from the date of allotment.
For each investment amount greater than or equal to Rs. 2 crores: NIL. NAV Publication / Resale / Redemption:

Investors may try their luck on infrastructure of emerging economies by investing in the Tata Growing Economy Infrastructure Fund
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