Kotak AMC to launch media, old economy funds

Aabhas Pandya

Kotak Mahindra Asset Management Company plans to unveil media and old economy schemes shortly to expand its range of sectoral funds. The AMC currently offers MNC and technology funds, which were launched earlier this year. Kotak Mutual Fund will also shortly approach the Securities and Exchange Board of India to seek permission for investing in Indian ADRs and GDRs.

"As the current fall has shown, it is difficult to get a diversified portfolio with most diversified equity funds overweight on technology stocks. We feel it is a better investment option if an investor is able to spread his investments across a basket of funds - say, 30 per cent in technology, 20 per cent, each in MNC and media funds and so on. We intend to offer investors a variety of funds so that they can diversify without leaving much to the discretion of the fund manager," says S N Rajan, chief investment officer, Kotak Mahindra AMC.

"We are also exploring the possibility of launching an index fund, for this fund gives investors a pre-determined basket of stocks," discloses Shekhar Sathe, chief executive officer, Kotak Mahindra AMC. "However, the only problem with an index fund in the Indian fund industry is that most diversified equity funds comprehensively beat index funds," he adds.

When launched, Kotak AMC's media fund will be the first scheme dedicated to the media sector. "We currently have around 10-11 media stocks, listed on Indian bourses while a number of media IPOs are in the pipeline. With such diverse activity in the entertainment sector, the industry offers a lot of investment opportunities," points out Rajan.

Despite the sharp erosion in net asset values of technology funds, Rajan says K-Tech is still getting net inflows. "Those investors, who are convinced about the long-term potential of technology stocks, are locking money at attractive levels and we are largely getting a retail response," he adds.

Rajan says K-Tech has an internal limit of 10 per cent to non-technology stocks. "Though non-technology companies provide a definite cushion, we cannot have every company in the portfolio simply because it has an Internet strategy. We invest only in those companies, where Internet is adding to the bottom line and driving valuation on the bourses," elaborates Rajan.

The fund manager also has a strict definition when it comes to picking up companies under the MNC fund. "We invest only in those companies, which are Indian subsidiaries of multinationals while ignoring those which are Indian transnationals or which earn a sizeable income from exports," he says. This investment strategy is a marked departure from the investment strategy of some of the other MNC funds, which also invest in Indian transnationals like Infosys, Satyam or Reliance Industries.

The CIO of Kotak Mahindra AMC is also bullish on the theme of old economy and is unfazed when it comes to the performance of some of the other funds, which have a similar theme. "The sector offers a number of good-quality, undervalued investments and has the potential to give good returns in the long run. We are confident of getting a good response for this fund," he says.

Both Rajan and Sathe have pinned hopes on divestment to bail out equity and debt markets. "Besides unlocking the value in a number of public sector companies, it will provide the government an alternative means to raise money, thereby pepping up the debt markets," says Sathe. The CEO does not see the debt markets stabilising in the near-term, with the government yet to complete around 40 per cent of its borrowing programme. "We aim at maintaining a defensive portfolio with the average maturity of both K-Bond and K-Gilt (Investment Plan) under two years," he adds.

Source: Value Research

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