February 27: Sun F&C Value Fund was the only other open end equity fund launched in 1997 besides DSP Merrill Lynch. The maiden fund from Sun F&C Mutual Fund, a joint venture between Foreign & Colonial Emerging Markets and the Sun group, Sun F&C Value Fund seeks long term capital growth through investment in equities.Under normal conditions, the fund is to invest around upto 95 per cent of its corpus in equities and upto 30 per cent in debt and money market instruments.
The scheme's investment philosophy is based on `value investing'. The scheme attempts to buy shares which are selling at a price lower than the company's actual business value or future earnings potential.
A value-manager thus looks for a stock which is priced low relative to the earnings its generates, the dividends it pays, its total asset (book value) or the cash flow it produces.
"Low" can be measured relative to the overall market, relative to the industry, or relative to a specific financial variable such as earnings. Avalue-oriented style tends to favour stocks that are neglected, have had setbacks, or have not generated positive attention among the analyst community. They may be industries that are less popular or operate in niches that are difficult to analyse. Value investors have a fairly long horizon and value-managed funds often have low portfolio turnover.
Sun F&C Value Fund had a low profile launch on May 23, 1997. The scheme closed for initial subscription on July 5, 1997 and mobilised an initial corpus of Rs 3.51 crore, the lowest by an open-end equity fund so far. The fund's corpus has risen marginally and stood at Rs 3.58 crore on December 31, 1997. The Value Fund has a 83 per cent exposure in equities and the balance in money market. The equity exposure includes 34 stocks and the fund has an average holding of Rs 7.97 lakh. Major industry exposure includes software, pharmaceutical and banking & finance.
While both Templeton India Growth Fund and Sun F&C are claimants to the value investment strategy,there is hardly an iota of similarity between the portfolio holdings of the two funds. For instance, Templeton India Growth Fund has a marginal or little exposure to sectors like software, pharma, etc.
The other difference between the two funds is that while Templeton is mainly invested in "Indian stocks", Sun F&C has major exposure in "MNC stocks".Sun F&C Value Fund was initially launched as an interval fund with quarterly repurchase and resale facility but has been converted into an open-end fund from February 2, 1998. Moreover, the fund has also brought down the entry and exit loads.
The fund earlier used to charge a 3 per cent load on both entry and exits. Now the entry load is three per cent for amounts less than Rs 2.5 lakh, 2.75 per cent for amount less than Rs 1 crore or less, two per cent for amount less than 50 lakh, etc. The above loads for redemption of units are applicable only in the event redemption within one year of subscription/allotment.
Value Research
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
