The fund seeks to invest in equity and equity-related instruments and into fixed income securities of pharma or other associated companies so as to generate consistent returns.
It is an open-ended pharma sector scheme which invests in equity and equity related instruments. It belongs to the high-risk category and is therefore suitable for investors who are looking for long-term growth.
Sector specific Equity Funds
These are mutual funds that invest in a particular industry or sector. There is a lack of diversification in these funds as the holdings of this type of fund are in a particular sector. Since they offer less diversification, concentration risk is high, making them risky. These funds take exposure in a single sector, and therefore their performance is aligned to the performance of that particular sector alone.
Pharma Sector Equity Funds
These are sector-specific mutual funds whose portfolio mainly comprises equities of pharmaceutical companies. These funds are considered suitable for an investment horizon of 3 to 5 years. Pharma sector is considered to be a defensive sector which remains shock-proof from events like demonetisation because consumers have a critical need of products from this sector. The sector has a secure nature, thereby offering a great opportunity to long-term investors for long-term growth. This sector has high growth potential because the domestic market is highly under penetrated. Indian Pharma companies majorly earn from international markets, this acts as a buffer for the temporary loss that might occur in domestic volumes.
Name of AMC: Reliance Nippon Life Asset Management Limited
Name of Trustee Company: Reliance Capital Trustee Company Limited
Asset Size: As on 31st March 2017, the fund had an asset size of Rs. 1,321.80 crores
Fund Manager: Mr. Sailesh Raj Bhan
About Fund Manager
Sailesh Raj Bhan is the Deputy Chief Investment Officer of equities at Reliance Nippon Life Asset Management Limited. Having an experience of over 19 years in equity research and fund management, Mr. Bhan also manages another sector specific equity fund called Reliance Media and Entertainment Fund. He has been managing other diversified equity schemes Reliance Equity Opportunities Fund and Reliance Top 200 Fund since their inception in 2005 and 2007, respectively. Reliance Equity Opportunities Fund is one of the largest Flexicap schemes of the country having assets of over USD 800 million and Reliance Top 200 Fund is another diversified large cap fund.
Benchmark: S&P BSE Healthcare
S&P BSE Healthcare is the only benchmark for investments in pharma-related companies and is therefore used by all the sector-specific equity funds of this sector to benchmark their performance
Salient Features of Reliance Pharma Fund
- The Fund aims to provide consistent returns with a combination of large cap and mid cap companies
- The fund invests across various segments of the industry such as international businesses, domestic businesses and CRAMS (Contract research and manufacturing services) that include high growth pharma businesses as well as the ones having deep value.
- The fund belongs to a sector that has very less impact of market volatility. A sector that is low capital intensive with decent cash flows and good growth visibility.
- Financial experts advise for having an investment horizon of 2-3 years for this fund.
- Over 95% of the NAV of this fund is allocated to stocks since the outlook for the sector is good over medium term
- The sector is expected to benefit from the change in investor sentiment considering the relatively more certain growth in earnings of this sector.
Reliance Pharma Fund offers the following investment options:
- Growth Plan: Investors who are seeking to earn capital appreciation from their investment and not regular income may find this investment option suitable. Under this plan, the dividends would not be declared and the income earned on the corpus would remain invested in the plan.
Reliance Pharma Fund also offers growth option under the growth plan under which income or returns through capital appreciation or gains will not be distributed to the investors by redemption at applicable NAV of the units held by them.
- Dividend Plan: Investors seeking a regular income in the form of dividends may find this option suitable. Under this plan, Reliance Pharma Fund will pay out regular dividends to the unit holders. It will be distributed after deducting the applicable TDS and surcharge from the distributable surplus. There are two options under this plan which the investor can opt for:
Dividend Payout Option: The option under which the unit holders are paid the declared dividend within 30 days of declaration.
Dividend Reinvestment option: The option under which the dividends to be distributed under the plan are reinvested into the investor’s account at the ex-dividend NAV on the next transaction day from the date of declaration in order to purchase additional units. To be able to opt for this, the investor must indicate the same in the allotted space on the application form.
In the case of both declaration and pay out, an amount equivalent to the gross amount of dividend per unit as declared on the record date multiplied by the number of units eligible for the dividend will be deducted from the net assets of the unit holders. In the case of growth plans, the NAV of the unit holders remains unaffected by the payment of dividends.
Neither any capitalization ratio nor any targeted annual return or income is guaranteed by the fund. A series of circumstances have been listed in the Scheme Information Document under the section “Redemption of Units/Suspension of purchase” in the case of which accumulation of earnings and determination of NAV may be suspended temporarily.
Minimum Application Amount
There is a fixed minimum amount for purchase, redemption or switches each. For purchase it is Rs. 5000 and in multiples of Re. 1 thereafter. The minimum additional investment amount is Rs. 1000. Redemption of a minimum of Rs. 100 is allowed or for any number of units.
There are a number of products/facilities offered with Reliance Pharma Fund which can be listed as follows:
- SIP (Systematic Investment Plan): A facility which lets the investor to invest specified or fixed amounts at regular intervals. This lets the investor to benefit from the concept of ‘rupee cost averaging’ as the fluctuations of the market are averaged out, thus making the average per unit cost less than the average subscription cost per unit. In this case, the investor need not monitor the market price on a day-to-day basis and is sure to gain irrespective of the fact whether the market is falling, rising or fluctuating. There are specific minimum amounts with specific tenures which need to be followed while opting for this route of investment.
- Rs. 100 per month or more for a minimum of 60 months
- Rs. 500 per month or more for a minimum of 12 months
- Rs. 1000 per month or more for a minimum of 6 months
- Rs. 500 per quarter or more for a minimum of 12 quarters
- Rs. 1500 per quarter or more for a minimum of 4 quarters
- Rs. 5000 per year and in multiples of Rs.500 thereafter for a minimum of 2 years
2) Micro Systematic Investment Plan (Micro SIP) or PAN exempt investments
Investments up to Rs. 50,000 in a year per investor including the ones made through SIPs (Systematic Investment Plans) are exempted from the requirement of PAN details. There are certain caps varying according to the tenure on the maximum permissible amount for investment under this plan which can be listed as follows:
- For Monthly frequency: Rs. 4000 per month
- For Quarterly frequency: Rs. 12,000 per 3 months
- For yearly frequency: Rs.50,000 per year
This exemption for PAN details is however not applicable on PIOs, QFIs, HUFs, non-individuals etc.
It is important here to note that the cap of Rs. 50,000 applies on the total investment amount. Therefore:
- If a lump sum investment has already been made in a financial year and a fresh SIP mandate of an amount less than Rs. 50,000 is applied for, the fresh Sip mandate would still be rejected if the total investment amount is more than Rs. 50,000.
- The same would happen if a SIP mandate has been submitted previously, and an application for lump sum investment is filed later in the same financial year. In this case, however, the application for lump sum investment would be rejected.
Reliance Step-up Facility: There is an additional facility offered with SIP called as Reliance step-up facility. Using this facility the investor can gradually increase the SIP installment amount at pre-defined intervals. This lets the investor align SIP installment with the expected increase in the earnings of the investor over the tenure of SIP.
3. Systematic Transfer Plan (STP): An investment option which allows the investor of a particular Reliance Mutual Fund to transfer a fixed amount or variable amount to another open-ended scheme of Reliance Mutual Fund. They types of STPs can further be categorized into:
- Fixed Systematic Transfer Plan: The one where investor chooses to transfer a fixed amount from any of the eligible transferor schemes to any of the eligible transferee scheme of Reliance Mutual Fund.
- Capital Appreciation Systematic Transfer Plan: The one where investor chooses to transfer only the appreciated amount from any of the eligible transferor schemes to any of the eligible transferee schemes of Reliance Mutual Fund