IDBI Principal to launch salary savings mutual fund scheme

IDBI Principal Asset Management Company Limited (the Fund), the Mumbai-based 50:50 joint venture between India's leading financial institution, IDBI, and the US-based Principal Financial Services Group, is to shortly launch a salary saving mutual fund scheme.

"Introduction of salary saving mutual fund scheme is not a problem as we have invested heavily in information technology," assures Mr. V. Narayanamurthy, chief financial officer of the Fund. According to him, a large number of salaried persons are currently out of the mutual fund net owing to heavy upfront investment required, and the salary saving scheme is surely bound to attract them. The Fund has begun negotiations with corporate houses with a large employee base. He also added that the Fund had no immediate plans to launch sector specific funds - barring the gilt fund-in near future.

Mr. Narayanamurthy's immediate job on hand is to mobilise, and later manage, the funds raised under the Fund's four open ended schemes, viz: IDBI Principal Growth Fund, IDBI Principal Income Fund, IDBI Principal Balanced Fund and IDBI Principal Cash Management Fund. One per cent will be the entry load for investments made in the growth and balanced funds and 0.50 per cent will be exit load in respect of income fund. All the four schemes comes with two options viz dividend and growth plan with a facility to switch midway. Chips in Mr. Binay Chandgothia, head - Fixed Income of the Fund, "no other fund offers what we are offering the investors now."

While claiming that the Fund is not looking at huge mobilisations under the above schemes, he is confident of achieving a target of Rs. 1 crore under each scheme.

IDBI Principal, the most heavily capitalised asset management company in the country with a capital base of Rs 25 crore and a networth in excess of Rs 65 crore, promotes the four schemes under the umbrella Future Goals - Asset Allocation Program in a unique fashion.

"Today, mutual fund schemes are rigid and sold like consumer durables," Mr. Narayanamurthy opines. On the other hand, IDBI Principal will first map the risk profile of an investor and suggest the optimum investment mix that would achieve his objectives.

That aside, the company offers an investor the flexibility to re-balance or shuffle his portfolio so that the original investment objective is not disturbed due to efflux of time. In order to avail of the re-balancing facility an investor has to invest a minimum of Rs. 10,000 in two schemes.

Explaining his investment plans, Mr. Narayanamurthy says, "in the case of the growth fund, a major chunk will be invested in IT, media stocks." Adds Mr. Chandgothia, "Before investing, we will discuss with the company concerned to know their operations and plans. We shouldn't be surprised by any sudden development in a company."

While the income fund plans to invest its money in debt instruments, money market instruments or securitised debt, the balanced fund intends to have a portfolio mix of equity and equity related instruments and debt and money market instruments.

On the other hand the cash management fund with two variants - money at call and liquid option – will invest its fund in money in call/term money, repos/reverse repos, bill rediscounting, similar liquid money market instruments and other debt instruments. The initial investment is Rs 10 lakh in the case of money at call option, which clearly dissuades the retail investor. However, for the retail investor the Fund has given the option of investing a minimum of Rs 10,000 in respect of liquid option.

"The net asset value (NAV) will be calculated 365 days/year and dividends too will be declared and reinvested 365 days a year," remarks Mr. Narayanamurthy.