Franklin Build India Fund FBIF NFO: Review Analysis & Details

It seems like the various fund houses have suddenly found a new keyword - Infrastructure and all are attempting to lure the investors into believing that infrastructure sector is set to grow and hence it is the right time for investors to invest their money into Infrastructure Secotr (and right time for the mutual fund houses to come out with Infrastructure funds).

High on the heels of Reliance, which recently concluded the NFO or New Fund Offer for its Reliance Infrastructure Fund: (Review & Analysis of NFO), the Franklin Templeton Investments (India), which is another big name in Mutual fund industry, has come out with its Infrastructure focussed fund called the Franklin Build India Fund FBIF NFO. In this article, we will analyse how good is this Franklin Build India Fund NFO, whether this Franklin Build India Fund offers anything new or unique for the investors and whether the investors should invest in Franklin Build India Fund FBIF.
Let's begin with some details about Franklin Build India Fund FBIF.
What are the NFO dates for Franklin Build India Fund FBIF?
The NFO for Franklin Build India Fund will open on July 10, 2009 and will close on August 8, 2009.

What is so unique about this Franklin Build India Fund ?
There is nothing so special or unique about this fund. It has the title "Build India" - and is attempting to generate returns from investing in companies or stocks for Infrastructure, Financial Services, Social Development, Agriculture and Resources. Basically, they have covered everything and all the sectors.
They claim that India (still) is the fastest growing economy of the world and the above listed sector specific companies and stock will be beneficial for investments. Hence they have come out with this NFO.

Nothing so different about the investment strategy:
Equities and Equity-linked instruments: 70%-100% (Infrastructure-related companies investment will be: 65%-100%, Other companies: 0%-35%); So major focus will be on infrastructure.
Debt securities (including government securities & securitised debt) and Money Market Instruments: 0%-30% [including investments in Foreign Securities as may be permitted by SEBI/RBI up to 35% of the net assets of the scheme, exposure in derivatives up to a maximum of 50%].

What is the Load Structure (Entry Load & Exit Load) for Franklin Build India Fund ?
Load Structure: Entry Load: Less than Rs.5 crores - 2.25%, Rs.5 crores & above - Nil
However, in accordance with SEBI rules, Zero entry load will be charged for direct applications;
Exit Load: Less than Rs. 5 crores - 1% if redeemed within 1 year of allotment, Rs.5 crores and above - 1% if redeemed within 6 months of allotment.

Franklin Build India Fund NFO offer price: Rs. 10 per unit plus applicable load, if any.

Final Thoughts about the Franklin Build India Fund?
Nothing so special or unique about the Franklin Build India Fund - same asset allocation promise, same long only investment strategy, same load structure as like the other fund. in the budget, there were huge expectations that the infrastructure sector will be given a big boost, but we all know what the budget has offered - it was a cautious approach budget. Infra Companies like IVRCL stock prices were beaten up severly immediately after the budget. So the investor has to take a call - whether the infrastructure sector & its stocks and companie will deliver handsome returns is a call in the future

Reliance Infrastructure Fund: Review & Analysis of NFO

The Reliance Mutual Fund house has come out with its latest NFO or New Fund Offer. It's called the Reliance Infrastructure Fund. Seeing the recent positive trends in the stock market and the stable government formation, it is betting on the Infrastructure growth in the country. Also, the good response received by the ICICI Prudential Target Returns Fund (Review & Analysis) where it managed to collect 800 Crore Rs. from the market, has also sent a positive message to the mutual fund industry. Hence Reliance, which is one of the big mutual fund houses of India, has come out with the Reliance Infrastructure Fund.
What is the basic investment strategy or ideology for the Reliance Infrastructure Fund?
It's obvious to everyone now. There is going to be a stable government at the center, led by an economist. Stability so there can be progress and that will be lead by improvement in infrastructure. Hence, this Reliance Infrastructure Fund aims to generate returns by investing in the infrastructure companies under the assumption that they will benefit and give positive returns. They expect government funding, private equity investments, Public Private partnerships PPP, Foreign investments, etc. to be the source of money for infrastructure companies and hence they wish to benefit from the same.

Related: Tata Growing Economy Infrastructure Fund

Which specific sectors and areas will the Reliance Infrastructure Fund invest in?
There is a long list available. Some of them are indicated below:
Airports
Banks, Financial Institutions & Term lending Institutions
Cement & Cement Products
Coal
Construction
Electrical & Electronic components
Engineering
Energy including Coal, Oil & Gas, Petroleum & Pipelines
Industrial Capital Goods & Products
Metals & Minerals
Ports
Power and Power equipment
Road & Railway initiatives
Telecommunication
Transportation
Urban Infrastructure including Housing & Commercial Infrastructure
Mining
Aluminum

What are the details of Reliance Infrastructure Fund?
The Reliance Infrastructure Fund is an open ended scheme so you can buy and sell units at the NAV values every business day. 65% 10 100% of the money will be invested in equities or stocks, rest will be debt and money market instruments and cash.

Available plans for investments:
Growth Plan: Growth Option & Bonus Option
Dividend Plan: Dividend Payout Option & Dividend Reinvestment Option

Minimum investment amount for retail investors is Rs. 5000.

Which benchmark index will be tracked by Reliance Infrastructure Fund?
It will be BSE 100.

What is the load structure: entry load and exit load for Reliance Infrastructure Fund?
For retail investors upto 2 Crores of investment, 2.25% is the entry load (isn't that big???)

Exit load: 1% if redeemed/switched on or before completion of 1 year from the date of allotment
Nil if redeemed/switched after completion of 1 year from the date of allotment

However, that high entry laod of 2.25% will not be charged if the investor applies directly to the Reliance Mutual Fund House.

Is there any Systematic Investment Plan or SIP plan available for investing in Reliance Infrastructure Fund?
Yes. SIP is availble in the Retail Plan of Reliance Infrastructure Fund.

What is the NFO period or dates for Reliance Infrastructure Fund?
The NFO period is currently open - from 25th May 2009 to 23rd June 2009. Scheme to re-open on July 22nd , 2009.

Mutual Fund NFO offers Currently Open: July 2009
- DSP BlackRock World Energy Fund NFO: Review & Analysis

- Sahara Super 20 Fund NFO Review & Analysis

- Religare Business Leaders Fund NFO Review & Analysis

- Franklin Build India Fund FBIF NFO Review & Analysis

What's the final summary and risk of investing in Reliance Infrastructure Fund?
The Reliance Infrastructure Fund is another simple mutual fund which is betting on the growth of infrastructure in the country. So nothing so special and exciting about the mutual fund. Like any other mutual fund, this fund will try to generate returns. The long list of areas/sectors they have provided for investing, covers almost everything in the infrastructure region.
The big question is, will this fund deliver?
That will happen only if the fund managers really identify the gems in the infrastructure sector to maximize the returns. So as like any other mutual fund or fund manager, you have to bet on the fund manager's performance.
Then there is danger for this infrastructure sector to underperform. What if the global problems continue and there is no foreign or private investment coming to infra sector. What if other internal problems block the growth of this sector. So it's the investor's call

Infrastructure Funds: Should you invest in Infrastructure Funds?

You may have seen a lot of funds coming to the markets with their NFO recently - So many of them. Why are there so many funds coming in at this moment?
One reason may be tax savings ad this is the taxing time for the Indian markets. But not all funds give tax benefits. The funds have a lot of variety, ELSS, etc., but the primary domain in which the new funds are being offered is the Infrastructure funds domain.

These infrastructure funds are the ones which invest in the infrastructure companies, either on national or global basis and attempt to benefit from the infrastructure improvement, thereby looking for price appreciation in the infrastructure company stocks in which these funds have invested the investors’ money.

Another reason why so many new funds are coming to the market is due to the recent turmoil in the markets in December-February period, where markets went down at global levels, shattering the trusts of individual investors. Hence the same individual traders and investors are now seeking for professional advice or so called professional money management. How well the fund managers are able to manage the money professionally, is already covered with details in this article

Another reason is the norms setup by regulatory authorities. The regulatory authorites do not allow fund houses to come out with a similar version of a fund which they have already introduced in the past. May be the following sounds familiar to you:
• Growing Economies Infrastructure Fund
• Banking & Infrastructure Fund
• Infrastructure Fund Series 1
• Infrastructure & Economic Reform Fund
• Infrastructure Advantage Fund
• Agri & Infra Fund
• Global Infrastructure Fund
• Small & MidCap Infrastructure Fund
• Infrastructure & Real Estate Fund
As rediff website has pointed out, “Never before have we seen so much 'variety', revolving around a particular investment theme” & “what will happen when fund houses run out of innovative names for their infrastructure funds. We quickly realised that some of them have already planned for this. . . . there will be Series 1, Series 2, Series 3 and so on and so forth!”

Ultimately, with so many funds hitting the markets, the investors have a lot of choice. The same is backed by the ever growing demand of Infrastructure. The promise of the growth story, the next emerging market, the next emerging economy, and so on.
However, we should not forget that there are global signals of a recession- which will definitely hit the Indian growth story. The growth rate of 9% is not easily achievable.

Another thing that these funds claim is that there are lot of Infrastructure companies coming to India and working in India, hence there will be loads of opportunities to benefit from the profits if we invest in these infrastructure companies. However, one should not forget that the more competitive a sector becomes, the more difficult it is to make money from the stocks. When the sector itself is full of competition, then obviously the profits will be shared between various companies. Which company will get what share, no one knows. How will the fund manager select the best performing infrastructure companies, there is no guarantee of anything.

I should not miss out on mentioning the case of Emaar MGF IPO, which was cancelled because of this recent market turmoil.

A union of a Dubai based construction company and an Indian counterpart, the IPO failed miserably and succumbed to market pressure and had to be cancelled. Things work randomly. Therefore, let’s not just get fascinated by the jazzy names and titles of the various NFO that are hitting the markets. No sector can grow forever, no company can continuously make profits, no country can have a consistent growth record. Invest wisely and with caution. All the best!

Table of Contents

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

Table of Contents