As a diversified power fund, the mutual fund would be focused on investments made into the power sector companies such as those involved in power generation or power distribution. Being diversified, even though there will be significant exposure of the mutual fund to the power sector, the fund will invest in companies of various market capitalizations to provide a balance of risk and returns to the investor. However, a diversified power fund such as the Reliance Diversified Power Fund may also invest in a range of other companies that are not involved in the power sector. Such investments would, however, comprise a minor portion of the portfolio.
The Reliance Diversified Power Sector Fund is an open ended equity fund which is expected to be suitable for investors seeking long-term capital appreciation on their investment. Considering that this equity fund will be focused on investing in various equities and equity-related schemes, this investment would be better suited to the needs of comparatively risk tolerant investor groups. As the name suggests, the equity and equity-based investments would be made into organizations operating in the power sector including those involved in the generation, distribution and other aspects of the power sector.
Key Statistics of the Reliance Diversified Power Sector Fund
Inception: The Reliance Diversified Power Sector Fund was first opened for subscription as an open-ended equity scheme on the 8th of May 2004. Thus the fund has a successful track record of over 12 years. In September 2013, the Reliance Diversified Power Sector Fund was merged with the Reliance Infrastructure Fund, however, the name of the former was retained at the end of the merger.
CRISIL Rank: In the quarter ended March 2017, CRISIL ranked the Reliance Diversified Power Sector Fund as 3rd among Thematic-Infrastructure mutual funds currently available in India.
Risk Level: Being a thematic fund, this mutual fund features a high degree of exposure to a particular sector, namely, power, thus there is a high chance that the performance of this fund will be closely correlated to the performance of the India’s power sector companies. Additionally, a major portion of the fund’s capital would be invested in equity and equity-related schemes, which are potentially high-risk investments. As a result, the risk rating of this mutual fund is classified as high.
Risk Maintenance: Being an equity mutual fund, the Reliance Diversified Power Sector Fund is prone to certain common types of risk including the risk of the principal amount. Additional risks might be a result of low liquidity created by market conditions that cannot always be reasonably predicted. In such cases, the fund manager may decide to control redemptions or investments into the scheme in order to maintain a balance of risk and growth of the mutual fund. Additionally, the fund managers, as well as the support team, would play a key role in ensuring that the investments chosen for the fund would ensure that a balance of risk, as well as a return, is maintained so as to maximize the capital appreciation of the investors.
Key investment areas: In order to manage the overall risk inherent in the scheme, the fund manager, and the team would be involved in seeking out leading players in the following key areas:
- Power Generation inclusive of companies engaged in modernizing/renovating plants
- Transmission of power
- Distribution of power including retail distribution
- Power trading
- Primary focus on funding/financing power projects
- Power equipment
- Power technology
- Emerging areas of Indian power sector
Apart from the areas of equity investment mentioned above, this scheme would also be involved in making investments into select securities such as:
- Money market investments with maturities of up to 1 year as allowed by RBI and SEBI.
- Non-convertible portion of convertible securities
- Additional domestic fixed income securities
- ADRs and GDRs issued by Indian power companies as per SEBI/RBI guidelines
- Foreign debt/equity in line with SEBI guidelines
- Derivatives including index futures, stock futures, forward rate agreements, etc.
- Liquid schemes launched by mutual funds registered with SEBI
- Any additional schemes allowed by regulations periodically
Entry Load: As per SEBI guidelines, there is no entry load for an investor interested in investing into the scheme for the first time or those making an additional investment into the scheme.
Exit Load: The scheme features an exit load of 1% in case the investor redeems or switches out the existing units of the scheme prior to 1 year from the date of allotment of units in the scheme. If units of the fund are held beyond the 1 year period, no exit load is applicable to the scheme.
Minimum Investment: For a first-time investor in this scheme, the minimum lump sum investment requirement is Rs. 5000 and higher investments are in multiples of Re. 1 over the Rs. 5000 initial investment in the scheme. Investors can also invest via the SIP route with a minimum amount of Rs. 500 per SIP for a minimum period of 12 months.
The fund is currently being co-managed by Mr. Sunil Singhania and Mr. Sanjay Doshi. Mr. Sunil Singhania is currently employed as the CIO-Equity Investments with Reliance Nippon Life Asset Management Company also known as Reliance Mutual Funds. He is a commerce graduate from Bombay University and also has a CA degree from ICAI, Delhi. With an experience of 21 years in financial markets, Mr. Singhania is highly experienced in the sell-side of India’s equity market. Mr. Sanjay Doshi is an 11 year veteran of India’s capital market with special focus on fund management and equity research. Before joining with his current company i.e. Reliance Mutual Fund AMC, he had worked with JP Morgan and Macquarie Securities.
Investment Philosophy of the Reliance Diversified Power Sector Fund
In order to achieve its goal of providing long-term capital growth as well as generating consistent returns from the power sector of India, the fund is expected to follow the following strategy:
- Act as an investment opportunity in order to participate in the continued growth of India by making investments in securities of organizations operating in the power segment
- Ensure sufficient diversification of the investment portfolio through ensuring that the investments are spread across a wide range of companies
- The fund would capitalize on opportunities in the power sector including but not limited to companies that finance, generate, transmit and distribute power within India.
An additional focus of the portfolio would be on the creation of long-term adjusted returns as this is among the few sectors where there is substantial demand.
Plans and Options for Reliance Diversified Power Sector Fund
Direct Plan: The Reliance Diversified Power Sector Fund offers a direct plan option featuring a low expense ratio. This plan can be opted for by an individual investor only if they are investing directly with the Reliance Mutual Fund AMC. The lower expense ratio leads to the generation of potentially higher returns for the investment and this leads to a slightly higher NAV for the units bought under the direct plan. The currently available direct plan variants include the growth option and the dividend option. Further subdivisions of the dividend option are dividend reinvests and dividend payout.
Retail/Regular Plan: This is the option available to investors who are engaged in making their investment through a third party. However, this option is also available to individual investors making an investment through the mutual fund AMC. The higher expense ratio of the regular plan leads to a lower NAV for units of the scheme however, the larger corpus usually available in case of the regular plan helps ensure that there is greater portfolio diversification in the scheme. An individual investor may invest in a regular plan through Paisabazaar.com without having to worry about any portfolio management or brokerage fees. Available options under this plan include dividend (payout/reinvest) and growth options.
Growth Option: Investors who are focused on long-term capital appreciation tend to prefer the growth option offered by the Reliance Diversified Power Sector Fund. In this option, any profits generated by the scheme are automatically invested back into the scheme itself. This increases the AUM of the fund while providing additional liquidity to the scheme such that the NAV of the fund increases. The benefit of higher NAV is however not available to the individual investor, while he/she remains invested in the scheme. The benefits are available in the form of higher redemption value available to the investor at a later date.
Dividend Option: In the case of the dividend option, the investor can choose among two available variants – dividend reinvest and dividend payout. Dividends are obtained only when the scheme is profitable and the fund manager/management team declares a dividend for the scheme. The amount of dividend that an individual receives is dependent on the number of units of the mutual fund. The dividends are funded out of the NAV of individual units hence, the value of individual units decreases proportionately. In the case of the payout option, as the name suggests, the dividend is automatically credited to the registered bank account of the investor. In the case of the dividend reinvestment scheme, the dividend earned is automatically converted into units of the scheme, which are added to the current units balance. This translates to higher returns when the investor redeems his/her investments.
Key Holdings of Reliance Diversified Power Sector Fund
As mentioned earlier, the Reliance Diversified Power Sector Fund invests in a wide range of equities in the power sector. The following is a short list of some of the key equity investments of the Reliance Diversified Power Sector Fund*:
|Engineering and Capital Goods||KEC International, Kirloshkar Pneumatics, KSB Pumps, Cummins, Larsen, Thermax, GE Power India, CG Power India, CG Power, GE T&D India, Kalpataru Power, BGR Energy, Texmaco Rail, Kirloshkar Brothers, OM Metals Infrastructure, Greaves Cotton, Emco, etc.|
|Metals and Mining||Jindal, Jindal Saw, Jindal Stainless, etc.|
|Miscellaneous||Apar Industries, JITF Infralogis, PTC India, Stelite Technologies, Exide Industries, Finolex Cables, Jayaswal Neco, etc.|
|Utilities||Torrent Power, National Thermal Power Corporation Limited, Tata Power, Calcutta Electricity Supply Corporation, Reliance Power, Reliance Infrastructure, etc.|
|Mutual Funds (Sectoral)||Reliance Liquid Fund – Treasury Plan (Direct, Growth)|
|Cash/Call/Repo/Money Market||Cash Margin – Derivatives, Cash Margin – CCIL, Reverse Repo and Net Current Assets.|
*The above list is indicative and subject to periodic change as per business requirements of SBI Mutual Fund AMC and SEBI guidelines.
Investing in Reliance Diversified Power Sector Fund through Paisabazaar.com
Individual investors seeking to invest in regular plans of the Reliance Diversified Power Sector can invest in the fund through the Paisabazaar.com mutual fund platform. All an investor needs are to sign up for a free Paisabazaar.com investment account in order to start investing online without having to worry about brokerage or portfolio management charges. Such charges are levied by a number of third-party brokers but the Paisabazaar.com mutual fund platform is completely free to use and invest in as long as you can complete the KYC criteria for mutual fund investments as mandated by SEBI.
Once the investor has logged on to the mutual fund platform, he/she can get the complete list of all the funds that are available from Reliance Mutual Fund AMC through the Paisabazaar.com investment platform. Additionally, one can compare the performance of the various fund types based on key criteria such as risk category and performance over the past 1 year, 3 years and 5 years. Once the investor has made the choice of investment, he/she can click on the “Buy Now” button to view other statistics of the fund such as exit load, AUM data, sector allocations, top investments and more. On subsequent pages, the investor would be asked to provide key mutual fund purchase data such as the total amount to be invested, plan option and variant to opt for – Regular Growth, Regular Dividend Reinvest or Regular Dividend Payout. The purchase can be completed through the net banking portal and confirmation of the transaction as well as unit allocation information is sent to the registered email address/phone number of the investor.