“What’s in a name? That which we call a rose by any other name would smell as sweet,” said the bard a long time ago. MFs seem to understand that more than anybody else these days.
MUMBAI: “What’s in a name? That which we call a rose by any other name would smell as sweet,” said the bard a long time ago. Indian mutual funds (MFs) seem to understand that more than anybody else these days.
That’s why they keep launching schemes they already have, with different names. ‘Old wine in new bottle’ has always worked in Bollywood, and MFs see no reason why it shouldn’t work with them.
The latest scheme to join the bandwagon is Birla Sun Life Special Situations Fund. The scheme is an open-ended diversified equity scheme. The new fund offer (NFO) closes on January 15, 2007.
Mukul Gupta, CEO, Birla Sun Life MF, said, “Today, India Inc is witnessing a spate of special situations. Mergers and acquisition deals, private equity investments, open offers and buybacks have become the order of the day. This trend is expected to continue in the future as most quality companies would plan for expansions, enter new business lines and restructure existing businesses. We would use our investment expertise to identify the right special situations in our new fund that can generate superior returns.”
Is it different from the usual? Now, let’s try to understand how the scheme defines a special situation. Special situations are out-of-ordinary situations that companies find themselves in from time to time.
The scheme plans to invest in such stocks and generate extra gains. Some of these situations are-
Demergers
Mergers
Debt structuring
Buyback
Other Situations: Introduction of new products, new segments, acquisition of new customers, R&D-related developments, management re-structuring, capital infusion, evaluation of fixed assets, properties or other assets etc.
All these might result in a favorable environment for stock price appreciation.
Contrarian investing: This strategy consists of investing in companies that are currently out of favour, overlooked or neglected due to temporary fallacies like poor results, failure of product launches, factors affecting the industry, political interventions, etc.
However, these companies may be fundamentally strong, but the market may have failed to recognise their true potential.
With such a wide definition of “special situation”, almost any company can fit the definition. As per the fund’s own admission, there were 973 special situations in financial year 2006-07.
Given this, the agglomeration of so many special situations ensures that the scheme is not “of a distinct or particular kind or character” and will not be much different from most existing diversified equity funds.
Rather, put money in existing diversified equity schemes that have a good track record over a 3-5 year period.
Some of the existing schemes of the fund house like Birla Sunlife Frontline Equity, Birla Sunlife Equity and Birla Midcap have performed really well over the last 3-5 years and would make better investment bets.
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