November 24, 2013 9:01 pm
What are pros and cons of investing in close ended scheme? Would Reliance Close ended equity fund be able to deliver in terms of performance?
@Ashish, true, past track record of amc/fund makes a difference.
my conclusion –
1. “Historically, open-ended funds have done well. Overall, these are more flexible. So, if investors are disciplined and don’t panic and rush to redeem investments when markets fall, it is as good as investing in a closed-ended fund”
2. Liquidity is the only issue and hence, investors shud put in only if he/she is sure those funds will not be required for the duration for which these are invested!
You are right in saying that if people don’t wish to invest in an NFO then there would not be any NFO / IPO coming in.
But then in my case, I invested in HDFC Premiere Multi Cap (through NFO, NAV Rs.10) around Apr 2005 and at the same time I had invested in Franklin India Blue Chip (open ended, NAV of Rs.60.5). Today if you look at HDFC Premiere Multi Cap is sitting at Rs.26.706 while FIBC is at Rs.236.710.
Now when I look back, I feel investing in NFO wasn’t a good idea. Of course, I can not generalise as there may be a few funds which may have done much better than HDFC PMC but investing in a fund which is running and has a past track record scores a little better.
May be that’s why people don’t pay high salaries to freshers as compared to the one who are experienced, still people recruit freshers cos they know tomorrow they will be experienced and can replace the seniors.
@Ashal, if we go by your thinking there shud not be any new IPO and NFO cos so many shares and funds are already existing – invest in them but unfortunately the world seems to be made of more learned ppl than we think or assume – and I never said nav of 10 is cheaper than 200 but in nfo amc is investing in equity at today’s rate which ‘cud’ be cheaper than the existing fund and that can make a diff. in the perfo of the fund.
Also yes, fund manager makes a diff – definitely makes a diff – y do u think amc employs IITians and IIM’s as their fund managers – they cud employ u and me for the job!
Dear Gaurang and dear Anshuk, show me the so called higher performance from any close ended fund.
Dear Gaurang, if you feel 10 Rs. NAV is cheaper than 200 Rs. NAV you need to learn a lot regarding MF investment.
Regarding fundmanager, let me give an example – Mr. X is fund manager in an already running successful open ended MF. The AMC decide now to offer a close ended fund with the same Manager. Do you people feel Manager ‘ll start underperforming for proven fund and and overperform for new fund?
@Ashal at the time of IPO or NFO there always exists good shares or funds but there is an ‘possibility’ to invest at low rate or nav and ‘may’ give good returns at long term and that is what we r discussing whether is there such possibility with this fund or not.
@anushk – that’s a good point – fund mgers need not worry abt redemption or addition and can deliver a better performance – thanks for the link – it gives lot of clarity!
@Gaurang; one way will be to look at the past performance of that fund manager
@Ashal; these closed NFOs will help the fund managers to take bets for the duration of the fund without worrying about redemption or additional surplus of funds in the middle; like what happens with open ended funds..
Dear Gaurang, OK. As you asked the question for education purpose, I w’d ask you not to invest in a new fund which is going to invest in the same shares where you are already investing through your existing MFs.
When so many good funds are availble for us, why WE should invest in an unknown fund.
I am new to mf investments.I saw an add of reliance close ended equity fund which attracted me due to its low nav.Though I am an absolute novice.Please guide me whether or not to invest in it?
Dear Ashal, I believe in – if I don’t know about anything – ask – it could be better – don’t just sit quiet and remain idiot forever! Keep your mind open for the Change!
Dear Gaurang, when already there are so many open ended funds available from Reliance as well as other AMCs, why do you want to ride an unknown horse?
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