L&T Mutual Fund has announced the launch of its closed end equity fund called L&T Emerging Businesses Fund. The NFO of the fund will open for subscription on April 22 and close on May 06, 2014.

 

This is L&T MF's first equity fund after acquisition of Fidelity MF.

 

At a press conference held in Mumbai, Ashu Suyash, Chief Executive Officer, L&T MF said, "With the launch of this fund, we are broadening our offering of equity funds. The fund provides an opportunity to benefit from investing in the undervalued segment of the market."

 

Sharing the rationale behind the fund, Soumendra Nath Lahiri, Head of Equities as well as fund manager of the scheme said, "Currently, the small cap space is very attractive as many good companies are available at fair valuations. Secondly, this segment is untapped. Only one fund is available in this space. Also, many companies in this space that have emerging businesses and where there is growth will reward investors who stay invested for a long time regardless of the market they are in."

 

On the investment strategy, he said that the fund would invest in companies which are in the early stage of development and have the potential to grow their revenues and profits at higher rate. The fund will follow a bottom-up strategy and focus on stocks with adequate margin and safety. Suyash described their equity investment process called GEM which stands for generation of ideas, evaluation of companies and manufacturing and monitoring of portfolios. 

 

L&T Emerging Business Fund is a two year close ended fund which would be converted into open-ended equity scheme afterwards. Lahiri said that the close end structure gives adequate time and flexibility to fund managers. "Due to untimely redemptions, fund managers have to sell assets which affect the entire portfolio and existing investors. Such pressures are like bouncers which keep fund managers on the back foot. Structuring a product close ended for two years will give us adequate time to establish good fund performance." 

 

The fund offers SIP in its scheme, first time in close ended equity scheme. Investors have to mandate tenure and number of SIP during the NFO period. Like ELSS, each SIP would have a close end structure with two year lock in.

 

Benchmarked against S&P BSE Small Cap Index, the scheme aims to generate capital appreciation by investing in a portfolio of equity and equity related instruments. The minimum application amount is Rs. 5000. The scheme will charge an exit load of 1% if redeemed within 1 year from the date of maturity or conversion into open ended scheme. No exit load will be charged thereafter. SN Lahiri, Rajesh Pherwani and Abhijieet Dakshikar are the fund managers of the scheme.

 

The AUM of L&T MF was Rs 18255 crore as on March 2014.