Baroda Pioneer Banking and Financial Services Fund (BPBFSF)
An open ended Sectoral equity fund seeking to capitalise on opportunities in Banking and financial services sector
|Type||Open-ended Sectoral Scheme||Benchmark Index||CNX Bank Index|
|Min. Investment: |
For Lump sum - Rs 5,000 and in multiples of Re 1 thereof |
For Systematic Investment Plan (SIP) - Min
Rs 1000 for 12 months Rs 1000 and in multiples of Re 1 thereof
|Face Value||Rs 10 per unit|
|Entry Load||Nil||Exit Load *||1.00%*|
|Issue Opens||June 01, 2012||Issue Closes||June 15, 2012|
* An exit load of 1.0% will be levied if redeemed/switched out before 1 year from the date of allotment of units. After that exit load is nil.
The primary investment objective of the scheme is to “generate long term capital appreciation for unit holders from a portfolio invested predominantly in equity and equity securities of companies engaged in the banking and financial services Sector. There is no assurance or guarantee that the investment objective of the scheme will be realized”
*Source: Scheme Information Document
Is this fund for you?
Baroda Pioneer Banking and Financial Services Fund (BPBFSF) is a sectoral fund from the stable of Baroda Pioneer Mutual Fund, which will focus on citing opportunities available within the Banking and Financial Services (BFSI) sector, and thereby link its performance against the CNX Bank Index.
BPBFSF will be actively managed, with an intention to optimize returns by investing in various equity and equity related instruments within BFSI sector, including derivative contracts (both futures & options) – upto 50% of the net assets, subject to regulatory approvals. Hence, BPBFSF may expose its investors to high risk if the use of derivatives is not restricted to hedging. Moreover, by holding a portfolio, comprising of the stocks from the CNX Bank index, BPBFSF will hold a concentrated portfolio which will again make it a risky investment proposition.
Portfolio & Investment Strategy
While citing opportunities within the BFSI sector, BPBFSF will follow top-down approach of investing and manage the fund actively. The key factors for its investment strategy will be:
- Over all macro-economic conditions
- Sector specific factors
- Valuation specific factors
- Sound financial strength
- Good management
Thus given the above, the asset allocation which will be followed by the fund will be as under:
|Instruments||Allocation Range (% to Total Assets)||Risk Profile|
|Equity and Equity Related Instruments of companies engaged in Banking & Financial Services Sector||80||100||High|
|Debt and Money Market Instruments||0||20||Low|
(Source:Scheme Information Document)
The Scheme retains the flexibility to invest across all classes of debt and money market instruments with no cap or floor on maturity, duration or instrument type concentrations. The Fund will dynamically manage the portfolio maturity profile based on the current market condition. Since the intention of the Scheme is to dynamically manage the asset allocation, the percentages of asset allocation would change depending on view on interest rates as well as the level of corporate spreads prevailing at the time of investment and also the availability of different assets at different point of time. Also the total debt derivative exposure will be restricted to 50% of the net assets of the Scheme. The Scheme shall not invest in equity derivatives. Investment in derivatives shall be for hedging, portfolio balancing and such other purposes as maybe permitted from time to time.
Fund Manager Profile
Mr. Dipak Acharya will be the fund manager of BPBFSF. He holds a master’s degree in commerce. He is an AICWA and has to his credit PGPMS and CAIIB. He has a total work experience of more than 22 years and has been with the fund house from 2003. Prior to joining Baroda Pioneer Mutual Fund, he worked with Bank of Baroda for 10 years in treasury and credit department. At present, Mr Acharya is managing Baroda Pioneer Growth Fund, Baroda Pioneer ELSS’96, Baroda Pioneer Infrastructure Fund, Baroda Pioneer PSU Equity Fund.
The banking and financial sector is sensitive to the movement of interest rates in the economy. It is often treated as a proxy to GDP growth in a nation. India’s GDP growth has moderated considerably and is now well below its post crisis growth trend. At 5.3%, the latest quarterly GDP for the 4th quarter of FY 2011-12 has been the lowest in nearly last 9 years. The Non-food credit growth in 2011-12 has been tepid which has slowed up considerably towards the end. The money supply too has followed the same trend. Asset quality of the banking industry has deteriorated considerably and corporate loan restructuring activities have more than doubled in FY 2011-12 from a year earlier. Falling rupee and aggressive borrowing program of Government of India is causing liquidity deficits in the system. Cost of borrowing has gone up considerably for banks eating into margins. Moreover, newly introduced provisioning norms may put further pressure on margins. Government and thus RBI will be watchful of the inflationary pressures in the economy and would discourage any demand driven inflation. Current situation demands solid actions from Government on the fuel pricing. Rationalisation of diesel and other petroleum products may affect the demand for autos; which in turn may affect the demand for loans. On the other hand financial services companies such as brokerage houses and non-banking financial institutions focusing on a specific sector are suffering from the slackness in the economy. Therefore, we believe that the sector is not poised for any stellar performance. However, if RBI adopts more lenient approach and recommends further monetary easing; the sector may take sigh of relief and then would see a turnaround.