The Hindu Business Line : Morgan Stanley Growth Fund: Invest

INVESTMENTS can be considered in Morgan Stanley Growth Fund, a close-ended fund that can be bought only in the stock market. The fund is trading at a discount of close to 18 per cent to its net asset value.

This discount is at the lower end of the range at which this scheme has traded over the years. While it has been profitable to buy the units when the discount is about 27 per cent and to sell it when the discount has narrowed to about 18 per cent, it is quite likely that this discount may not widen at all, henceforth.

The fund is drifting ever closer to its redemption, scheduled for February 2009, now only 39 months away. As the D-day approaches, the discount will narrow even further. Morgan Stanley Growth Fund also registered a slight improvement over the previous years. This improves the possibility of excess returns for investors in the secondary market. This should also lead to a narrowing of the discount at which the units trade.

Performance: Over the years, the scheme has had the uncanny knack of tracking the BSE-100 index. Even as other mutual funds would take advantage of a roaring bull run and out perform the BSE-100 by a wide margin, this fund would stay just ahead of the BSE-100. This was despite the fund managers making some striking calls each year about what themes would work in the market.

If it had been an open-ended fund, such performance would generally not have been considered investment-worthy. That this close-end fund traded at a discount to its NAV and is also managing to perform as well as the broad market made it investment worthy.

In 2005, however, fund performance has improved. Its performance is now comparable to that of many other large-cap funds. For instance, over the past 12 months, this fund has out performed schemes such as Franklin India Bluechip, Templeton India Growth and Sundaram Growth.

Portfolio: The size of the portfolio is now at about Rs 2,000 crore and has always been one of the largest equity funds in India. This size has proved to be a disadvantage in the past, pulling down returns.

Now, this size is not such a disadvantage as the market capitalisation and liquidity of Indian stocks has risen to substantially higher levels.

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