L&T Mutual Fund announced the launch of L&T Business Cycles Fund, an open ended equity scheme. The aim of the fund is to generate long term capital appreciation from a diversified portfolio of predominantly equity and equity related securities, including equity derivatives, in the Indian market with focus on riding business cycles through strategically changing allocation between various sectors and stocks at different stages of business cycles in the economy.
The new fund offer (NFO) will remain open from July 30 – August 13, 2014.
Speaking at the launch, Ashu Suyash, Chief Executive Officer, L&T Investment Management, said, “We continue to broaden our offering of equity funds through innovative products based on customer insights. The one of its kind L&T Business Cycles Fund will invest in companies that are strategically placed to make the most of the economy’s business cycles. During high growth times, the portfolio will be aimed at cyclical companies. On the other hand, the portfolio could largely comprise defensive companies to help generate stable returns during periods of low growth. The business cycle approach helps the fund potentially deliver better risk adjusted returns and enable investors to make the most from the stock market at all times.”
Venugopal Manghat, Co-Head of Equities and the Fund Manager of L&T Business Cycles Fund said, “Cyclical and defensive stocks tend to outperform all other investments during economic recovery and sluggish phases respectively. If we look back, from 2004 to 2007, when the economy was in a growth phase, cyclical stocks delivered average annual returns of over 45%. During the years 2008 to 2013, which included one of the worst financial crises of our times, defensive stocks delivered over 16% annually. The L&T Business Cycles Fund has the flexibility to point its portfolio to cyclical or defensive stocks depending on the business cycle. Overall, the focus will be on identifying companies that offer best value relative to their respective long-term growth prospects, returns on capital and management quality.”
The Fund is benchmarked to the S&P BSE 200, and will have a normal allocation to equity and equity related securities within a range of 65% to 100% of net assets. The allocation to debt and debt related instruments will be within a range of 0 – 35%. The Fund also has the mandate to additionally invest in foreign securities. The fund will be managed by Venugopal Manghat and Abhijeet Dakshikar (foreign securities).
At L&T Mutual Fund, we follow a proprietary investment process called G.E.M (Generation of ideas, Evaluation of businesses / companies and Manufacturing and monitoring of portfolio). While identification of such themes and investment ideas constitute “G” in our G.E.M. process, we rely on our strong in-house research team to thoroughly evaluate the investment ideas and our experienced fund managers then use the shortlisted investment ideas in the scheme portfolios depending on the mandate of the fund.
The minimum initial amount for lump sum investments is Rs 5,000. The Systematic Investment Plan (SIP) option will be available during the NFO period with a minimum of six instalments and each single instalment of a minimum of Rs. 1,000 each under the monthly SIP option.
Source for performance of cyclical and defensive stocks stated aforesaid: Source: ICRA MFIE, from 31st Dec 2003 to 31st Dec 2013. Performance of cyclical stocks is shown as an average of S&P BSE Auto, S&P BSE Bankex, S&P BSE Consumer Durables, S&P BSE Capital Goods & S&P BSE Metals performance. Performance of Defensive stocks is shown as an average of S&P BSE FMCG, S&P BSE Healthcare and S&P BSE IT performance. Composite indices are calculated assuming weights are rebalanced on a monthly basis. Past performance may or may not be sustained in the future. The aforesaid numbers are given as an example to show performance of the cyclical and defensive stocks in the past and there is no guarantee that the performance results will be same in future.