Reliance Mutual Fund launched new scheme – Reliance Closed Ended Equity Fund (5 year lock-in)

Issue Details Reliance Close Ended Equity Fund
Issue Open15 Nov 2013
Issue Close29 Nov 2013
Issue TypeA five year close-ended equity scheme
Face ValueRs 10
Entry LoadNil
Minimum Application Amt5000
BenchmarkS&P BSE 200
Fund ManagerSailesh Raj Bhan

Investment Objective:

The investment objective of the scheme is to provide capital appreciation to the investors, which will be in line with their long term savings goal, by investing in a diversified portfolio of equity & equity related instruments with small exposure to  fixed income securities.

Why Close Ended?

Close-ended format would allow the portfolio manager the flexibility to execute the strategies effectively over the  chosen time frame – in this case, over 5 years. Further, the portfolio could be constructed based on the market merits, without possibly getting impacted by external flows. Close-ended funds may also allow fund managers to take concentrated positions in stocks / sectors and possibly offer portfolio that may be distinct and unique from other open-ended funds.

Framework of the Fund

Fund Endeavors to invest into companies with:

  • Solid businesses which are available at attractive valuations
  • Companies having sustainable business characteristics with 10-12 year operational track record which are at an inflexion point to scale up 
  • Companies having the ability to generate sustainable free cash flows and having otential for rising Return on Equity (ROE’s) over the years
  • High operating leverage not getting captured in today’s valuations

Fund Strategy

Fund Endeavors to invest into companies with:

Scalable Opportunities – Long Term Growth Prospects undermined due to near term challenges Currently, these are nascent in India but are large globally and offering relatively large potential for scaling up in the future. 

Out of Favor – Unloved and Under researched companies. Companies which are leaders in their segments i.e. top 2-3 Companies which have had 15-20 years of listed history Companies with low near term visibility & hence low expectations and Lack of street coverage.

Distressed Valuations – Markets on a sale, Companies which are unduly impacted by non-fundamental reasons and offering attractive investment opportunities.

Corporate Actions – Companies which are potential beneficiaries of corporate actions such as merger, buy back, etc 


Key Highlights of the Fund

  • No market cap bias – investments would be made across stocks in different market caps, as long as the stocks fit in the definition of the investment framework
  • No Benchmark constraints – the fund portfolio may be significantly different from the sector weights and stocks in the benchmark (S&P BSE 200)
  • Fund would endeavor to declare dividend as and when opportunity arises

 Key Differentiators of the Fund

       Fund will make an effort on owning stocks as businesses and valuing them for their “absolute return” potential

      Focus will be on quality companies with long track record currently beaten down due to lack of participation/ lack of research/ low near-term expectation &/or other non-fundamental reasons 

      Strategy of the fund will be not to completely mirror the benchmark Fund will endeavor to invest across market caps and will be well diversified as many sectors/stocks trading below fair value.

Who Can Invest

The product is suitable for investors looking at:

v  Long Term Capital Growth

v  Investment in diversified portfolio of equity & equity related instruments with small exposure to fixed income securities 


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