Jun 19, 2009

Reliance Infrastructure Fund: NFO Review & Analysis

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. 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: Risk Factors related to Mutual Funds

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

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.

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...

Also Read: How to Make money by Investing in a Mutual Fund?



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