NFO Review : Religare Gold Fund
Nov 16, 2011

Author: PersonalFN Content & Research Team

Religare Gold Fund

An Open ended Fund of Funds Scheme

Summary

Type	Open-ended gold fund of funds scheme.	Benchmark Index	Domestic Price of Gold
Min. Investment:	For Lump sum -> Rs 5,000 in multiples of Rs 1 thereafter For Systematic Investment Plan: Monthly frequency -> Rs 1,000 per month and in multiples of Rs 1 thereafter Quarterly frequency -> Rs 1,500 per quarter and in multiples of Rs 1 thereafter	Add. Investment:	Rs 1,000 and in multiples of Rs 1 thereafter
Face Value	Rs 10 per unit	Expense Ratio:	1.50% of the daily average net assets of the scheme
Entry Load	Nil	Exit Load	2% if units are redeemed / switched-out on or before 6 months from the date of allotment 1% if unit are redeemed / switched-out after 6 months, but within 1 year from the date of allotment No exit load is payable if unit are redeemed or switched-out after 1 year from the date of allotment
Issue Opens	November 15, 2011	Issue Closes	November 29, 2011

Investment Objective*

The investment objective of the Scheme is to provide returns that closely corresponds to returns provided by Religare Gold Exchange Traded Fund.

However, there is no assurance or guarantee that the investment objective of the Scheme will be achieved. The Scheme does not assure or guarantee any returns.

*(Source: Scheme Information Document)

Is this fund for you?

Religare Gold Fund (RGF) is the first gold fund of funds scheme from the stable of Religare Mutual Fund, which will predominantly invest its corpus into units of Religare Gold Exchange Traded Fund (RGETF). The Fund is launched especially considering the requirements of those who want to buy gold in a physical (i.e. paper) form, but do not have a Demat account. Unlike ETFs, one doesn’t need to maintain any Demat account to invest in RGF. Similarly, if one opts for the SIP route of investing (apart from the fact that it has an option to hold units in demat mode for lump sum investments), demat mode is not available.

RGF will follow a passive investment style (as it predominantly invests in units of RGETF) by benchmarking its performance against the domestic prices of gold. Moreover, the endeavor of RGF would be to replicate the returns generated by RGETF, whereby the deviation (i.e. tracking error) would not be more than 2% on an annualised basis net of recurring assets of the scheme. It is noteworthy that a tracking error is inherent in a passively managed mutual fund schemes, and such errors may cause the scheme to generate returns, which are not in line with the performance of the underlying scheme and also the designated benchmark - here the domestic price of physical gold.

The fund is mandated to allocate its assets as under:

Type of Instrument	% of Net Asset	Risk Profile (High / Medium / Low)
Units of RGETF	95 % - 100 %	Medium
Money market instruments*	0 % - 5 %	Low to Medium

*For the purpose of managing liquidity requirements
(Source: Scheme Information Document)

Fund Manager Profile

RGF will be managed by Mr. Nitish Sikand who is a Bachelor of Commerce and also has to his credit an MBA (Finance). Prior to joining Religare Mutual Fund, Mr. Sikand has worked with ICICI Bank Ltd. (as a product manager - private banking) from July 2005 to April 2007, JM Mutual Fund (as an analyst - fixed income) from October 2004 to July 2005 and Citicorp Maruti Finance Ltd. (as a relationship manager - treasury (May 2000 - October 2004). He has a total work experience of over 8 years in fixed income markets and product developments.

Fund Outlook

Being a passively managed mutual fund scheme, RGF would closely link it performance with its underlying fund - RGETF and thus domestic prices of the precious yellow metal - gold. Aiming to keep its tracking error below 2%, RGF’s launch comes at a time where gold prices are near their peak in India (as well as other parts of the globe). Hence, this may be a daunting task for the fund manager to bet on gold at these elevated levels. However if global economic turmoil steered by the "debt-overhang" situation in the Euro zone escalates then, northward movement in gold prices would continue (as investors would prefer to take refuge under the precious yellow metal) and investors would benefit. But having said that, cyclicality of the asset class should not be overlooked which can make a case for corrective phases.

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