Limiting Size and inflows

To profit from the wealth creation theme, a smaller manageable size is more essential than desirable. Here's how.

Good quality equity stocks can be of small or large sized companies. Typically larger sized funds are forced to invest pre - dominantly in larger sized companies and have a large number of stocks in their portfolio.

Take the example of Company A Ltd. with a market capitalization of Rs 500 crores. Typically a fund will not invest more than 5% of the Company's total equity i.e. Rs 25 crores. For a fund with a corpus of Rs 1500 crores Company A will form 1.67% of the portfolio, while for the Premier Equity Fund with its limited size Company A will form 8.33% of the portfolio.

The New Fund Offer (NFO) of the Premier Equity Fund will close day subscriptions total up to a sizeable amount not exceeding Rs 300 crore (more likely to be much below this amount rather than be above it).

Further on, the Premier Equity Fund, even when it opens after the NFO, will pre - fix the amount of fund inflows to ensure that inflows do not exceed the quantum of investment ideas and only when the fund manager feels stocks are available at reasonable valuations. However investors who wish to apply through either a Systematic Investment Plans (SIP) or Systematic Transfer Plans(STP) can do so at any time i.e. even when the fund is not accepting fresh lumpsum subscriptions.

This restriction is on account of the fact that investor behavior is to invest when stock markets are rising and to withdraw when markets are in decline. This forces the fund manager to abandon the basic tenet of investing which is - buy low and sell high - and do exactly the opposite.

On account of the limited size and a firm control on future inflows, a Fund Manager has a better grip on the levels of inflows and hence invests only when convinced. Investors can exit the fund whenever they wish, at the daily - declared NAV (subject to load).

The Premier Equity Fund will at all times seek to protect the interests of long term investors by seeking to create barriers towards preventing early and untimely exits. There is an entry load of 2.25% for any amount for investments either through lumpsum/SIP. There is an exit load of 1 % on redemption within 1 year from the date of allotment or subscription.