Last week I wrote about the SBI RGESS, and now IDBI has also filed a prospectus for their own RGESS Fund, and it differs from the SBI RGESS fund in some fundamental ways.
First of all this is a close ended scheme where SBI RGESS was an open ended scheme. The lock in period of this fund is 3 years but it will list in NSE and BSE so people can trade the units on the exchange. I’m not sure what the situation with other mutual funds is right now and how liquid they are to trade in the stock exchange, and if you are investing in this scheme then it’s better to assume that your money will be locked in for 3 years.
The fund has a lock in period of 3 years because the RGESS requires it – how SBI doesn’t have such a lock in is not clear to me, but IDBI has clearly specified this lock-in period, and maybe SBI will file in a revised draft which will have such a lock in as well. (Read: Details on RGESS)
Anyone who wants to invest in this fund is free to do so, and it is not limited to first time investors by IDBI. However, the presence of a lock in period means that people who don’t want to take advantage of RGESS will be turned away from this fund. It really doesn’t offer anything for you to lock-in your money for 3 years if you don’t want the tax deduction.
What will IDBI RGESS Fund invest in?
The SBI RGESS fund was aimed at investing in only stocks that are part of the CNX 100. The IDBI RGESS Fund will also invest in these stocks, but in addition to that they can also invest in shares of public sector enterprises which are categorized as Maharatna, Navratna or Miniratna by the Central Government as these shares are also RGESS eligible securities.
Interestingly enough, IDBI has other funds that invest in RGESS eligible securities and as I said in my earlier post, I haven’t read anything that tells me that existing funds are not eligible for the RGESS fund; if you know differently then please leave a comment.
Other funds from IDBI that invest in RGESS eligible shares:
- IDBI India Top 100 Equity Fund: Invests only in Equities and equity related instruments comprising the CNX 100 Index.
- IDBI Nifty Index Fund: Invests only in and all the stocks comprising the S&P CNX Nifty Index.
- IDBI Nifty Junior Index: Invests only in and all stocks comprising the CNX Nifty Junior Index.
Â Actively Managed Fund
This is an actively managed fund which means the fund manager will pick and choose stocks in an attempt to beat the underlying index and generate extra returns.
Usually actively managed funds come with a higher expense ratio when compared with passive funds, and the expenses ratio of this fund is shown below according to the offer document:
(i) On the first Rs.100 Crores of the daily net assets 2.50%; (ii) On the next Rs.300 Crores of the daily net assets 2.25%; (iii) On the next Rs.300 Crores of the daily net assets 2.00%; (iv) On the balance of the assets 1.75%:
This indicates that this fund will not be low cost, and the expenses will be a bit high like other active funds. There will be both a dividend and a growth option, and investors can choose one of those.
They have just filed the draft document so dates for when this fund will open for subscription aren’t out yet, and I will update this post with the dates when they are declared.