DSP BlackRock A.C.E. (Analyst’s Conviction Equalised) Fund Series 1 is a closed-end diversified equity scheme offered to various individual and retail investor groups by DSP BlackRock Investment Managers Ltd. DSP BlackRock Investment Managers Ltd. is a joint venture between DSP Group, an Indian financial firm with over 150 years of experience in the sector, and BlackRock, a US-based company which is arguably the largest investment management firm in the world. The JV has been operating in India for over two decades now and it is considered as one of India’s leading asset management companies.
About Closed End Diversified Equity Funds
Closed-end funds are defined as mutual funds offer where investors enter into and exit from the scheme at only pre-determined time intervals. Thus, unlike open-ended funds, investments into closed-end funds are restricted by time interval and their investable capital is also restricted as a result of this. Due to the redemption restriction, these types of funds do not face any redemption pressure no matter how their investments are actually performing. Diversified equity funds, both closed-end or open-ended, invest in a variety of equities and equity-related schemes irrespective of market capitalization or sector allocation.
Why to invest in DSP BlackRock A.C.E. Fund Series
DSP BlackRock A.C.E. Fund Series 1 is designed to be a mutual fund scheme that primarily seeks to provide investors with capital appreciation while a secondary objective may be the generation of regular income for dividend option holders. The scheme would attempt to achieve these objectives through investments made into equities and equity-based schemes of various companies. The scheme does have the allowance to invest up to 20% of its net assets into equity derivative schemes should the fund manager spot a suitable opportunity in the segment. It is notable that returns are not guaranteed and the fund’s objectives may or may not be achieved.
Tax Considerations for Investments made in DSP BlackRock A.C.E. Fund Series 1
The DSP BlackRock A.C.E. Series 1 Fund is classified as a diversified equity mutual fund scheme hence it would mainly be invested in equities and equity-based securities. As a result, the fund would be taxed as per the current rules applicable to equity investments. At present, equity investments in India are subject to STCG (short term capital gains) and LTCG (long term capital gains). STCG rules are applicable to equity investments held for less than 1 year from date of unit allotment prior to being redeemed in lieu of a profit. Currently the STCG rate applicable to equity investments is 15%. However the DSP BR A.C.E. Fund Series 1 is a closed-end scheme and does not allow redemptions prior to completion of 1 year. Thus no STCG can be applied to investments made into this scheme. LTCG taxation is applicable to equity fund investments in case such investments have been held for over 1 year from the date of unit allotment. However, at present, LTCG is nil for equity investments, hence all returns received from DSP BR ACE Series 1 Fund investments are completely tax free under existing equity taxation rules. For additional details regarding taxation, investors should check the DSP BlackRock ACE Fund fact sheet, SID and KIM.
Key Features and Statistics of DSP BlackRock A.C.E. Series 1 Fund
NFO Period: The DSP BlackRock ACE Series 1 Fund will be featured as a new fund offer (NFO) from the 17th of November till the 1st of December. Those subscribing for this new mutual fund during this period will effectively receive units at the face value of Rs.10. Subsequently, the DSP BlackRock ACE Fund NAV will change daily as the value of its portfolio of investments changes due to market trades.
Entry Load: As per an RBI directive, there is no entry load applicable to this closed-end equity mutual fund.
Exit Load: Being a closed-end fund, the investor is not free to redeem his/her investment till the lock-in period has ended. Additionally, no exit load is applicable to redemptions from the scheme made after the end of the lock-in period.
Lock-In Period: A closed-end fund allows investors only limited opportunities to enter or exit from a scheme. This scheme has an entry period limited to the NFO period of the scheme from 17th November to 1st December, while the exit from the scheme can be made only after completion of 1110 days from the date of unit allotment. So in effect, the DSP BR Ace scheme has a lock-in period of 37 months counted from the date of unit allotment.
Minimum Investment Amounts: For those looking to subscribe for this scheme, the minimum investment amount for lump sum investments is fixed at Rs. 1000 during the NFO period. Being a closed-end fund, at present, no provision for SIP investments or additional investments has been provided by the AMC managing the fund. In case an investor is seeking to make a larger lump sum investment, amounts that are multiples of Rs. 10 over the minimum of Rs. 1000 are acceptable.
Fund Manager: The DSP BlackRock ACE fund manager is M.Suryanarayanan, a second level CAIA candidate who holds a CFA certification and has a graduate degree from IIM, Ahmedabad. Prior to joining DSP BlackRock, he had worked with Anand Ratha Securities, another reputed company in the sector.
Portfolio: As the fund has just started its NFO, in depth information of the DSP BlackRock ACE Fund portfolio information is currently unavailable. Portfolio details as well as the DSP BlackRock ACE Fund performance details will be available only after the fund gets listed and starts making investments on behalf of its investors.
DSP BlackRock A.C.E. Fund Series 1 Investment Plans
The DSP BlackRock ACE Series 1 Fund features multiple variants in terms of plans and options. The investor can thus choose the variant appropriate as per their unique investment requirements.
Direct Plan: The DSP BlackRock ACE Fund direct plan can be availed in case an investor is making his her online or offline investment either directly through the fund house or through a few select 3rd party market intermediaries such as CAMS RTA. The direct plan has a lower expense ratio hence potentially provides slightly higher overall returns to the investor.
Regular Plan: The regular plan is the most widely available scheme variant for interested investors. The DSP BlackRock ACE Fund regular plan can be availed through various 3rd party intermediaries as well as the fund house itself. This variant has slightly higher expense ratio as compared to the direct plan, hence the returns would be potentially slightly lower than direct plan investments.
Growth Option: Investors solely seeking capital appreciation on their investments can look at making their investment in the growth option of this closed-end equity scheme. In case of profits generated through investments, this scheme reinvests such profits to make the investor’s money grow further through increase in AUM and NAV of scheme units. Investors book a profit in the scheme by redeeming the units at a higher price as compared to their purchase price at a later date. However, such profits are not guaranteed by the fund.
Dividend Option: The dividend option of the scheme can be availed if an investor seeks to generate income while staying invested in the scheme. However, dividends can only be declared in case the scheme makes a profit from its investments that lead to availability of a distributable surplus. If such surplus is not generated, no dividend will be distributed, hence dividend is not guaranteed for investors of this option.
How to Invest in DSP BlackRock A.C.E. Series 1 Fund
During the NFO period from 17th November to 1st December 2017, investors can enter into the scheme either via the online or the offline route directly through fund house’s representative offices and CAMS RTA (registered transfer agents) offices located all over India. Alternately, direct and regular plans of the scheme may be purchased through the official DSP BlackRock Mutual Fund AMC website. The office locations can provide investors with the DSP BlackRock ACE Fund application form in paper, while this form is also available online in case the investor wants to go the digital route. Lastly, units of the fund’s regular plan can be availed through various brokers and 3rd party market intermediaries operating across India. It is notable that units of this closed-end scheme cannot be availed by prospective investors through any route once the scheme’s NFO period has ended.