Another scheme — the Tata Natural Resources Fund — has entered this space, but there is nothing which this fund can deliver that existing equity funds cannot
Three are three natural resources funds which were all launched in 2008 when the commodities boom was at its peak. Two of the three have beaten their respective benchmarks. A fourth one is now being launched - by Tata Mutual Fund. Is it worth investing in it? Not really. Look at how the existing natural resources funds have invested their money. The label is a misnomer.
DSP BlackRock Natural Resources & New Energy Fund manages a corpus of Rs180.50 crore as on 30th July. The fund has mainly invested in Indian companies. Its top five picks are Castrol India (10.12% net investments), SRF (4.86%), Hindustan Petroleum Corporation (4.54%), Indian Oil Corporation (4.52%) and Coromandel International (4.49%). The fund has 26.71% exposure towards mid-caps, 47.11% in small-caps and 23.88% in large-caps. The fund launched in April 2008 has posted a net asset value (NAV) return of 16% when its benchmark BSE Metal Index slipped by -0.74%, outperforming its benchmark by far. However, why a natural resources fund should have the BSE Metal Index as the benchmark is unclear.
Reliance Natural Resources Fund launched in February 2008 has been an underperformer. The fund has delivered 0.17% return since inception while its benchmark BSE 200 edged up 1.35% during the same period. Again, why should a natural resources fund have BSE 200 as the benchmark is a question. The fund had a corpus of Rs3,296.88 crore as on July 2010. Its major exposure was in Indian companies like Oil & Natural Gas Corporation, Reliance Industries, Hindustan Petroleum Corporation, Tata Steel and Bharat Petroleum Corporation, etc. The fund also has investments in foreign firms like Potash Corp of Saskatchewan, Peabody Energy Corp, General Electric Company, CSX CORP, Caterpillar, Macarthur Coal, BP Global, JGC ORD, Xstrata Plc and Atlas Energy Inc. It is impossible for Indian investors to know whether these stocks are worth the investment or not.
The third scheme, Sahara Power & Natural Resources Fund launched in June 2008 has been the top performer. The fund posted NAV return of 19% since inception while its benchmark S&P Nifty is up 12.34% between the same period. As on July 2010, the fund had a tiny corpus of Rs6.72 crore. Its top picks are Uflex Ltd (3.93% net investments), Gas Authority of India Ltd (3.59%), Rallis India Ltd (3.47%), Bharat Heavy Electricals Ltd (3.26%) and Hindustan Petroleum Corporation Ltd (3.22%).
The latest to join the natural resources bandwagon is Tata Mutual Fund, which recently filed a draft offer document with the Securities and Exchange Board of India (SEBI) to launch its open-ended equity scheme called 'Tata Natural Resources Fund' (TNRF). The fund comes with two plans - 'Plan A' and 'Plan B'.
The fund (Plan A) aims to invest in companies principally engaged in the discovery, development, production or distribution of natural resources in various economies of the world including India. At least 51% of the corpus would be invested outside India while the 'Plan B' would invest predominantly in India.
The Plan A scheme will be benchmarked against the 'MSCI World Energy Index' (70%) and 30% against the BSE 200. 'Plan B' will be benchmarked against the BSE 200 to the extent of 65% and MSCI World Energy Index to the extent of 35%. The benchmark is a complex concoction designed to justify the label. But investors don't really need it. There is nothing which this can fund can deliver that existing equity funds cannot.
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'I made my money by selling too soon.'
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