BNP Paribas Income & Gold Fund (BPIGF)
An Open-ended Debt Fund with an exposure to gold ETFs
Summary
| Type | Open-ended Debt Fund | Additional purchase: | Rs 1000 and in multiples of Re 1 thereof |
|---|---|---|---|
| Min. Investment |
For Lump sum - Rs 5,000 and in multiples of Re 1 thereof For Systematic Investment Plan (SIP) Weekly SIP - Minimum Rs 500 for 10 weeks Monthly SIP - Minimum Rs 500 for 10 months Quarterly SIP - Minimum Rs 500 for 10 quarters | ||
| Face value: | Rs 10 | Benchmark Index: | CRISIL Short Term Bond Fund Index + Price of Gold (neutral allocation: 75:25) |
| Issue Opens | May 17, 2012 | Issue Closes | May 31, 2012 |
| Entry load: | Nil | Exit load: | 1.00%* |
* 1.00%, if redeemed or switched-out upto 12 months from the date of allotment of units
0.50%, if redeemed or switched-out after completion of 12 months upto 18 months from the date of allotment of units.
Nil, if redeemed or switched-out after 18 months from the date of allotment of units
Investment Objective*
The primary investment objective of the scheme (BPIGF) is “to generate income from a portfolio constituted of debt and money market securities, along with investments in Gold Exchange Traded Funds (ETFs). However, there can be no assurance that the investment objective of the scheme will be achieved. The scheme does not guarantee / indicate any returns.”
Is this fund for you?
BNP Paribas Income & Gold Fund (BPIGF) is a debt oriented fund from the stable of BNP Paribas Mutual Fund, which will aim to manage risk by actively allocating its assets towards debt through fixed income instruments and gold through Gold Exchange Traded Funds (ETFs).
BPIGF aims to provide investors with the benefit of having exposure to two different asset classes through a single fund. The debt portion of the portfolio will help in generating a steady flow of income through stable returns. Debt & money market instruments would include Bonds, Debentures, Commercial Paper of Public Sector Undertakings and private sector corporate entities, Reverse Repurchase agreements in Government securities and Treasury Bills, Certificate of Deposit of scheduled Commercial Banks and Development Financial Institutions, etc.
On the other hand the portion of the assets allocated to gold through gold ETFs can help in capital appreciation of the overall portfolio. Generally this part of the portfolio will be passively managed, as investing in gold ETFs of other fund houses would not require active fund management. Also, since gold acts as a hedge against inflation and generally has a negative correlation with the equity asset class, it would along will debt help provide stability as well as appreciation to the overall portfolio.
Portfolio & Investment Strategy
BPIGF will invest in fixed income instruments which have a residual maturity of greater than 365 days. Thus the fund will be actively managing its medium term debt portfolio taking cues from the interest rate scenario prevalent during any given period. As far as investment in gold is concerned, it will be through gold ETFs only.
Thus, the fund seeks to generate long term capital appreciation by taking advantage of diversification by investing in a mix of fixed income securities including money market instruments and gold ETFs. By actively managing the portfolio, the scheme attempts to achieve its objective through both interest yield and capital appreciation.
Moreover, exposure to debt derivative instruments (not more than 50% of the net assets) will be taken only for hedging and portfolio balancing purposes.
Thus given the above, the asset allocation which will be followed by the fund will be as under:
| Instruments | Indicative Allocation Range (% to Total Assets) | Risk Profile High/Medium/Low | |
|---|---|---|---|
| Minimum | Maximum | ||
| Debt instruments including corporate debt, securitized debt and other debt instruments with maturity/average maturity / residual maturity/ interest rate reset greater than 365 days and money market instruments | 65 | 90 | Low to Medium |
| Gold ETFs | 10 | 35 | High |
(Source:Scheme Information Document)
Fund Manager Profile
Mr Puneet Pal is the Head – Fixed Income at BNP Paribas Mutual Fund. He is a commerce graduate from Punjab University and also holds an MBA in Finance from Symbiosis Institute of Management, Pune. Mr Pal has over 10 years of experience in the asset management industry. In his previous assignment from July 2008 - February 2012, he was Senior Vice President & Fund Manager at UTI Mutual Fund. Mr Pal was also a Fund Manager at Tata Mutual Fund (August 2006 - July 2008) before which he was with UTI Mutual Fund for 3 years.
Currently Mr Pal is managing BNP Paribas Flexi Debt Fund, BNP Paribas Money Plus Fund, BNP Paribas Bond Fund, All the BNP Paribas Fixed Term Plan/Series.
Fund Outlook
The launch of BPIGF comes at a time when the equity markets are reeling under pressure due to the debt crisis in the Euro zone and a depreciating rupee. But at the same time the scenario for the debt market looks bright as the Reserve Bank of India (RBI) is expected to reduce key policy rates (repo and reverse repo rates) thereby stimulating economic growth. In this bargain the yields on the debt instruments is expected to ease further which will result in appreciation in the prices of debt securities. Also, since the fund is mandated to invest in debt instruments having residual maturity of greater than 365 days and in gold ETFs which ideally gain over a longer time period, BPIGF can be suitable only for investors having a medium to long term investment horizon.
While it is an appropriate time for investors to invest in debt instruments taking into consideration their investment time horizon, investment in gold acts as a hedge against the inflation and its inverse relationship with equity (as it is generally observed) helps in containing the overall volatility of the portfolio.
The positives of both these asset class can provide stability as well as provide benefit of capital appreciation to the fund’s portfolio over the long term and in turn its investors who wish to stay invested in the fund for a medium to long time horizon of atleast 2 to 3 years.
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