Standard Chartered Enterprise Equity fund
- Thread starter Terahertz
- Start date
All-in-all, this NFO appears to generate revenue to Standard Chartered AMC, employing the most dubious possible investment strategy.
Investing in an equity IPO is not a sure fire way of generating listing gains. This statement might look insane but one can see the companies that got listed at a discount. See http://www.nseindia.com/marketinfo/ipo/ipo_pastissues.jsp
The market crashed last week (it needed to correct anyway because it already was running ahead of valuations. The fact is that it had the stellar rise towards the end and actually witnessed what one can aptly call a 'crash' than a 'correction').
Given that, there's news that various companies are putting their planned IPOs on the backburner. Nobody knows how long the downtrend in the equities is going to continue.
1. What if, we are going to see a protracted bear market? (let's assume that it's pretty short one, like what we saw in 2004 and move on to the second)
2. What if, we are going to have very few IPOs in the coming three years? (let's assume that this is a very rare possibility and move on to third)
3. What if, in the allottment process, the fund gets very minimal/nil shares from the IPO it applies for? (let's assume that this does not happen and move on to fourth)
4. What if, the IPO listing happens at a huge discount to the issue price? (Let's be very optimistic that this never happens.)
Many assumptions are made so far. But even if one assumption goes for a toss, the fund is very similar to a closed-ended index fund. An investor in this fund ultimately ends up getting the returns as of the index (watch the tracking error again). And, if the markets crash just before the redemption date of the fund, they'll to lose all their money.
May be it's a good thing to commit money to an open ended Index Fund (that works with simplicity, banks on predictability of investment strategy, and above everything else, at a lesser expense ratio). The investor can redeem the investment the moment (s)he wants it back.
If Standard Chartered Enterprise Equity Fund puts the attraction of a no-load, the existing Index Funds already provide that attraction - as far as one can tell, Franklin Templeton and HDFC do not charge any entry load into their Index schemes.
Investing in an equity IPO is not a sure fire way of generating listing gains. This statement might look insane but one can see the companies that got listed at a discount. See http://www.nseindia.com/marketinfo/ipo/ipo_pastissues.jsp
The market crashed last week (it needed to correct anyway because it already was running ahead of valuations. The fact is that it had the stellar rise towards the end and actually witnessed what one can aptly call a 'crash' than a 'correction').
Given that, there's news that various companies are putting their planned IPOs on the backburner. Nobody knows how long the downtrend in the equities is going to continue.
1. What if, we are going to see a protracted bear market? (let's assume that it's pretty short one, like what we saw in 2004 and move on to the second)
2. What if, we are going to have very few IPOs in the coming three years? (let's assume that this is a very rare possibility and move on to third)
3. What if, in the allottment process, the fund gets very minimal/nil shares from the IPO it applies for? (let's assume that this does not happen and move on to fourth)
4. What if, the IPO listing happens at a huge discount to the issue price? (Let's be very optimistic that this never happens.)
Many assumptions are made so far. But even if one assumption goes for a toss, the fund is very similar to a closed-ended index fund. An investor in this fund ultimately ends up getting the returns as of the index (watch the tracking error again). And, if the markets crash just before the redemption date of the fund, they'll to lose all their money.
May be it's a good thing to commit money to an open ended Index Fund (that works with simplicity, banks on predictability of investment strategy, and above everything else, at a lesser expense ratio). The investor can redeem the investment the moment (s)he wants it back.
If Standard Chartered Enterprise Equity Fund puts the attraction of a no-load, the existing Index Funds already provide that attraction - as far as one can tell, Franklin Templeton and HDFC do not charge any entry load into their Index schemes.
Last edited:
Sarath
Very well analysed ... and I agree with most of yr points
The Fund mgt seems to have run out of ideas .... it was obvious that picking value from the secondary market was getting more and more difficult (note the decline in growth at TISCO and SBI) ... so IPO was the brainwave which seemed feasible
But, on a lighter note, see also their ad campaign.... only 'jokers/clowns' will invest in it ... haha (As an ex -staff , maybe I should be more respectful of the organisation ... but, who cares ... these days the mentality is : slam bam ....etc. and two hoots for emotional links )
By the way, does anyone on this forum have some sort of database on historical performance of IPO's (thru' bull and bear phases)...oversubscription, listing profits, etc etc ... That would be a good guide for figuring out how good this new fund really can be
AGILENT
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