Tata Mutual Fund launches Tata Equity Management Fund
May 18, 2006

Tata Mutual Fund announced the launch of a unique new mutual fund scheme, the Tata Equity Management Fund. The Tata Equity Management Fund is intially an 18-month closed ended equity scheme with a weekly exit option to investors during the close-ended period. Upon completion of 18 months, the scheme will automatically be converted into an open-ended scheme. The is the first time such a product is being launched in India.

Tata Equity Management Fund seeks to understand the volatile nature of markets and generate capital appreciation and long-term growth opportunities by investing in equity and equity-related instruments, combined with a derivatives option that aims to manage the downside risk while aiming to maximise long-term returns.

Speaking on the occasion, Ved Prakash Chaturvedi, managing director, Tata Asset Management, said, "On the one hand, the economic fundamentals look good from a long-term view – given a high GDP growth, higher level of expenditure into infrastructure, increased global business for the BPO sector and new opportunities in the pharmaceutical and IT industries. However, in a current sustained bullish market, relative valuations have gone up significantly and investors are now worried about the optimisation of returns while investing. Tata Equity Management Fund presents a strategy to minimise risk and maximise return in such potentially volatile markets."

The Tata Equity Management Fund will invest across market capitalisations in a diversified portfolio of carefully selected stocks. The fund will aim to moderate downside risk to the portfolio through hedging the portfolio using stock or index derivatives. Besides, the fund would also capitalise on both short-term and long-term opportunities through a stock-specific or index-oriented hedging and shorting strategy to enhance returns. The extent of hedging of the portfolio is determined based on the month-end weighted average PE ratio of the S&P CNX Nifty and also depending upon the fund manager’s perception of the markets. The index derivatives will be used mainly for the purpose of hedging. However, the fund manager may, if the opportunity exists, use stock-specific derivatives to earn profits.

The new fund offer for the Tata Equity Management Fund will be open from May 15, 2006 to June 9, 2006. The scheme will reopen for repurchase not later than July 7, 2006.