The Hindu Business Line : Canbank plans mid-cap fund

CANBANK Mutual Fund has lined up an equity fund that will essentially focus on mid-cap stocks. The proposed CanEmerging Equities Scheme will predominantly invest in companies bearing market capitalisations in the Rs 100-2,500 crore range.

The scheme will under normal circumstances invest at least 65 per cent of its assets in equity and equity-related instruments, 85 per cent being the most likely scenario. A maximum 35 per cent can be allocated to stocks with market capitalisations outside the chosen range.

CanEmerging Equities will have BSE 200 as its benchmark index, the draft offer document sent to the Securities and Exchange Board of India for approval has mentioned. Mr J. Venkatesan has been named as the fund manager.

"The scheme will look for companies that are reasonably valued with high earnings growth potential", the offer document has stated, adding that the fund will adopt a bottom-up approach to investing. The portfolio will be diversified, with a number of sectors represented in it.

Investors will be offered, inter alia, an option that combines growth with automatic repurchase. Under this, the asset management company will redeem (without any further act from the investor concerned), a part of his or her holdings and effect the redemption.

The amount to be redeemed will be equivalent to the amount of dividend that the fund will be paying under its income plan, subject to availability of distributable surplus. For automatically encashed units, an exit load will not be applicable.

Additionally, a unit holder may also seek further redemption, which will be governed by normal procedures, it is pointed out.

Mid-cap funds sizzle

EQUITY funds concentrating on mid-cap stocks are mostly performing well, mutual funds circles suggest, adding that these funds have attracted significant investors' interests already.

As things stand, only a handful of funds actually carry the mid-cap tag, but there are a number of schemes that have taken a serious exposure to mid-cap stocks. The schemes in the former category include those managed by Birla MF, Sundaram MF and Chola Mutual Fund.

Among the funds that use more broadbased indices (including the likes of BSE-100 and S&P CNX 500) as their benchmarks are DSP Merrill Lynch Top 100, Franklin India Prima, HSBC India Opportunities and Prudential ICICI Discovery.

Birla Mid Cap has provided 66 per cent over the past two years (as on November 30), while Sundaram Select Midcap has turned in 79 per cent. Chola Midcap is a more recent entrant and does not have a two-year record.

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