Standard Chartered Mutual Fund unveils medium-term plan

Bangalore: Standard Chartered Mutual Fund has launched the Grindlays Super Saver Income Fund - Medium Term Plan targeted at retail investors seeking a mix of stable quality returns and safety.

The initial offer will be open between 16 June 2003 and 27 June 2003. The fund will invest 100 per cent of its portfolio in highly rated debt and money market instruments with no exposure to equities. One can invest a minimum of Rs 500 with no limit on the maximum amount.

The medium-term plan seeks to further segment the burgeoning income fund market by targeting investors with an investment time horizon of between four-to-12 months.

Says Standard Chartered MF managing director Naval Bir Kumar: "At Standard Chartered MF we have always offered our investors innovative schemes to suite their various investment needs. Our medium-term plan is yet another first that provides the right balance between returns and risk. It can be viewed either as an aggressive short-term fund or a conservative income fund depending on the investors perspective."

Says Standard Chartered MF head (investments) Rajiv Anand: "We have launched the medium-term plan at a time when interest rates across most fixed income products have hit an all-time low with the 10-year benchmark free falling from 9-11 per cent in 2001 to sub-6-per cent levels now. The launch of the fund thus assumes significance given that most market participants anticipate interest rates to be range bound."

According to the bank, the flat interest rate environment has meant that long-term funds have had to increase their duration by investing a greater part of the portfolio in longer maturing securities. Duration, measured in number of time periods, is a term that is widely used as an indicator of the interest rate risk that a fund carries. This in turn has meant increased volatility and thus increased risk in the short term.

While cash funds typically manage a duration of less than six months, the duration for short-term plans ranges between one and two years and that for long-term funds is now between six and seven years. The medium term seeks to exploit the huge gap between long term and short term by attempting to maintain a duration of between two and four years.

Income funds in the recent past have been attempting to structure their products in line with the requirements of the fixed deposit investor, through the launch of innovative fixed income products that perform best for a pre-specified time horizon, akin to the various maturity periods of fixed deposits.

This has led to the segmentation of the income fund market with the hugely popular cash/liquid funds occupying the extreme short end spectrum for the seven-to-30-day investor and the once-ubiquitous income funds positioned for long-term investors with a time horizon of a year and more.