DSP Investment Managers Private Ltd, the investment manager to DSP Mutual Fund has launched an open-ended value fund, which is open for NFO from November 20th Friday, and the subscription will end on December 4th. The fund follows a value investment strategy, and for better diversification, 35% of the portfolio will be global equities.
The fund benchmarked against the Nifty 500 index will allocate 65% in Indian equities. Also, it is planning to invest in debt and money market instruments and keep in cash or arbitrage. A maximum of 35% portfolio will be used for this, and only when investment opportunities meeting valuation criteria are not available. The company aims to provide investors better risk-adjusted returns with low volatility across cycles. By adopting a value investment strategy, the fund offers the investor exposure to quality companies at a reasonable price.
Kalpen Parekh, President, DSP Investment Managers, said that good companies rarely come cheap in today’s low-interest-rate world. The company needs to become more disciplined to identify companies with good valuations at a reasonable price. The approach focuses on avoiding bias and providing better risk management to investors. The scheme is ideal for long-term investors, as they have to endure a period of underperformance which is a part of the value investing journey. Unlike growth funds value funds invest in underpriced companies. Companies have an intrinsic value, and if the current market price is less than the intrinsic value, it is underpriced.
The investment process includes eliminating companies with a low valuation or of poor quality. These are either highly leveraged companies and have high price volatility. Valuations calculated considers fundamental factors like price to book ratio, return on equity, and long-term trends. The price to book ratio is measured with the price of the stock and its accounting value. Weightage is assigned according to internal risk guidelines. The portfolio will hold good companies but not expensive.
The open-ended equity scheme is moderately risky and offers the investor capital appreciation in the long-term. Fund manager M. Suryanarayanan will cover the equity portion, and Jay Kothari is the dedicated fund manager for overseas investment. From the date of allocation, the value fund will reopen for continuous sale and repurchase within five business days.
