Why AVOID Sector Specific Funds ?
Thursday, November 22, 2007
If you look at our recommendations, our Analysts have always recommended various Diversified funds. We had received few e-mails last year on how we missed the opportunity in IT Specific funds. Well Investors, we were the first one to burn our fingures in Sector specfic funds, especially in IT sector in 2000. [Gul Tekchandani's Sun Emerging IT fund, Samir Arora's Alliance IT Fund etc]Now in the image to your left, you can see yourself the returns IT specific funds have given in the past one year Vs Diversified Equity funds.
IT Funds - 0.39%
Diversified Funds - 44.57%
A Year ago IT funds were at 55% and Diversified Funds were again at 40%.
The focus of our investment advise is for disciplined investors who are serious to create wealth. Now to share the insider information, the fund managers of Diversified funds are also very smart. When they feel Banking or Capital Goods stocks are going to rise, they go for the top 5 stocks in the sector and ride the boom and exit. It is not that they are not participating at all.
Happy Investing!!!
Published by DalalStreet Business @ 10:52 AM
PRU-ICICI Real Estate Securities Fund in India
Monday, November 12, 2007
We have been informed that Pru ICICI will launch the country's first real estate fund. We are not too happy with the fund's objective, really especially, 65% Real Estate Debt + 35% Real Estate Stocks. Here is the presentation that we have got. [PDF]Why we are recommending a AVOID on this new fund offer?
The fund will take exposure to debt and it can vary between 50&-70%. Kotak, HDFC and other who raised money abroad for Real Estate have 5 to 10 years lock-in but they are investing directly in property and real estate stocks. That means they are acting as REITS [Real Estate Investment Trusts]. However, ICICI is investing 50% in debt and you have seen the lackluster performance of Realty Stocks lately, which is why we are recommending a AVOID.
We always recommend to invest in well diversified funds and over long period of time, they beat every other sector specific fund.
For example, until April2007, IT specific funds were showing YoY returns of 50%+ while diversified funds were showing 40%+. Today IT funds are showing 17% returns YoY while diversified funds are still showing 38%.
Published by DalalStreet Business @ 10:19 PM
