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Aabhas Pandya
New Delhi, Nov 12: The fund managers of Canpremium will be saddled with over Rs 30 crore in cash, which accounts for 57 per cent of the scheme's corpus. This has resulted from the redemption of the 17 per cent MTNL paper today. As on November 6, the fund's net asset value was Rs 10.78.
Canpremium, which went open-end in February this year, has a current corpus of Rs 53 crore. A conservative balanced fund, Canpremium holds only 17 per cent of its investments in equities while 83 per cent is in debt instruments. Thus, debt portion accounts for almost Rs 44 crore of the total 53 crore fund.
Contrary to the perception that redemption of 17 per cent MTNL paper would hit returns from the fund, sources at Canbank Mutual Fund said that the instrument was bought from the secondary market at a higher price. ``Thus, returns from the instrument were lower at around 14.5 per cent,'' sources said. ``We have already started deploying the money at 13.5 per cent to 14 per cent. We are also looking at some governmentsecurities and earn some trading profits,'' they added.
In addition they pointed out that given the conservative profile of the fund, the fund managers were unlikely to increase exposure to equities. ``We have already increased our equity exposure from 10 per cent to 17 per cent when the Sensex was around the 2800-level and we will take a relook as and when required,'' sources said.
After the redemption of MTNL paper, the fund now holds around 20 per cent of its investments in corporate debt and the rest in government securities and money market instruments. Canpremium is currently invested towards the shorter end of the market. The average weighted yield of the debt portfolio (inclusive of the MTNL paper) was 15 to 15.5 per cent.
Analysts point out that the redemption of the MTNL paper is unlikely to have a substantial impact on returns since the fund is likely to find debt papers of identical credit rating with more or less similar returns. ``The fund may find an erosion in the yield to the extent of25 to 50 basis points which will not have a substantial impact on the growth of net asset value,'' said an analyst.
``Currently, the Institutional Investors' Fund from the Unit Trust of India is one clear option which offers a return of 14 per cent per annum or the issue from Krishna Bhagya Jal Nigam with an annualised return of over 15 per cent,'' said a debt market dealer.
Prior to its roll-over and conversion to an open-end fund, Canpremium was managing assets of close to Rs 500 crore. The top equity holdings of the fund include ITC, MTNL, Hindustan Lever, Hindalco, Bajaj Auto, Tata Power, Reliance and IDBI. The fund has recently paid an interim dividend of 6.3 per cent. A no-load fund till December, 1998, Canpremium plans to introduce an entry load in the new calendar year. The load is likely to be in the range of 1 to 1.5 per cent.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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