The Hindu Business Line : ICICI Pru Mutual moots debt fund

Kolkata June 21 ICICI Prudential MF has worked out a three-year close-ended debt fund that will invest in securities related to the real estate sector.

The proposed ICICI Prudential Real Estate Fund - despite the name, this is not a vehicle for direct investment in real estate projects - will try to generate income through investments in debt securities (maturing in line with the maturity of the fund) of companies that are in, or are associated with, or benefit from, the real estate sector.

The secondary objective is to generate long-term capital appreciation through equity or equity-related securities of such companies.

To provide liquidity to the investors, the fund will provide repurchase facility at quarterly intervals on every 15th day from the end of the calendar quarter.

The fund may under normal circumstances allocate between 51 per cent and 100 per cent to debt securities, the offer document sent to SEBI has mentioned. Its equity allocation may go up to 49 per cent. The initial allocation will typically be 70 per cent in debt and 30 per cent in equity.

The fund will, inter alia, invest in companies that dabble in the following: real estate development, banks & finance companies, cement, construction, hotels and retail. Besides, a large number of companies, each with a substantial, albeit largely unrecognised, land or other immovable property (positively affecting the valuation) will be weighed.

JM HI FI - the closest rival

Given its investment universe, JM HI FI will possibly ICICI Pru Real Estate's closest rival. The JM fund, which can allocate to housing, infrastructure and financial services, is an open-ended product with marked exposure to construction companies (26.35 per cent on May 31, 2007) and real estate developers (12.43 per cent). But the main difference is that this fund invests in equities.

The fund's top holdings include Hindustan Construction, Nagarjuna Construction, Orbit Corporation and Ansal Properties. At the same time, Mr Sandeep Neema, fund manager, has key investments in companies such as SAIL, Bhel and Thermax.

JM HI FI has under-performed its benchmark, the Nifty, which has provided about 21 per cent since April 7, 2006, as against the fund's 4 per cent since inception on that day. The fund managed a modest Rs 30 crores on May 31.

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