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Friday, Feb 13, 2004

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Principal MIP plus invests in more stocks

Nilanjan Dey

Kolkata , Feb. 12

PRINCIPAL MF, the first to moot a monthly income plan (MIP) with a higher cap on equity allocation, which has by now become a trend, has gone in for product differentiation by investing in a greater number of stocks, including select mid-caps.

The maiden portfolio disclosed by Principal MIP Plus shows investment in around 25 stocks compared with 18 in the case of the older MIP. The former set represents a mix of large-cap leaders such as SBI and Infosys and small-cap stocks such as Asahi India Glass and Sona Koyo Steering.

The end-January tally further indicates that against MIP's investment of 7.79 per cent of its assets in equities, MIP Plus has taken a 14.89 per cent exposure to stocks. This reflects the new scheme's rationale: A higher, 15-20 per cent, equity allocation for investors with greater appetite for risk.

Large-caps, however, dominate the equity part of the portfolio. The top holdings are Maruti, BHEL, ACC, Satyam and SBI - the order and weightages are markedly different from those in the MIP. The fund manager's review points out that while equities and bonds have not done well over the past month, equity valuations (post January correction) should provide positive returns and the debt holdings should cushion against a possible rise in interest rates.

The MF maintains that both schemes are designed with similar investment objectives. Their target audiences are dissimilar, which partly explains why the portfolios are composed differently.

Global fund

Principal MF is finally coming out with its Global Opportunities Fund, a proposal mooted in August last year, Mr Rajan Krishnan, in charge of sales at the fund house, told Business Line. The scheme, in its original form, planned to invest up to 100 per cent of its assets in listed foreign equities in line with SEBI guidelines on overseas investments by domestic MFs.

The proposal was based on the belief that overseas markets will offer new opportunities for investment and portfolio diversification. Investment in foreign securities (as well as in ADRs and GDRs) by all mutual funds is permitted within an overall limit of $500 million. There is also a sub-ceiling for individual funds, subject to a maximum of $ 50 million.

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