Reliance Natural Resource Fund.

Reliance Mutual Fund (MF) has launched the Reliance Natural Resource Fund, an open – ended equity scheme.
The scheme opens for subscription on Jan. 01, 2008 and closes on Jan. 30, 2008.
The units of the scheme will be available at Rs 10 per unit during the New Fund Offer period.

Objective:
The primary objective of the scheme is to generate capital appreciation & provide long-term growth opportunities by investing in companies principally engaged in the discovery, development, production, or distribution of natural resources and the secondary objective is to generate consistent returns by investing in debt and money market securities.

Options: Growth/Dividend.
The scheme offers growth plan and dividend plan. Growth plan will have the growth option and bonus option. The dividend option will have the payout and dividend reinvestment facility.

The minimum application amount is Rs 5,000 and in multiples of Rs 1.00 thereafter.

The scheme aims at investing 65% to 100% in equity and equity related securities of companies principally engaged in the discovery, development, production, or distribution of natural resources and 0% to 35% in fixed income securities including money market instruments.

Load Structure

If the amount invested is less than Rs 20 million than the scheme will charge an entry load of 2.25% and it will charge 1.25% if the amount invested is less than Rs 50 million. There will not be any entry load if the amount invested is more than Rs 50 million.

The scheme will not charge any exit load.

RELIANCE MF OVERVIEW


Performance and Management

The performance of 65% of the portfolio will be measured against BSE 200 and the balance 35% of the portfolio will be measured against and MSCI World Energy Index.

Reliance Mutual Fund: New Fund Launches

  • Garnering funds not the only objective
  • Thought behind fund launches
  • Potential with a longer term view – key criteria
  • Attempt to provide diversification and uniqueness to an investors portfolio
  • Themes aim to capture maximum return


Flashback: Sector Fund Series (Dynamic Asset Allocation Sector funds)

  • Launched sector funds during 2003-04 when they were not very popular
  • Unique Dynamic Asset Allocation having flexibility to invest 0 -100% in equity and/or 0-100% in debt instruments
  • Four funds launched with a view of 5-7 years
  • Reliance Diversified Power Sector Fund
  • Reliance Media & Entertainment Fund
  • Reliance Banking Fund
  • Reliance Pharma Fund


Macro Economic Scenario: World GDP has been on an upswing
GDP Growth Rates (%)

2001

2004

2007

CAGR
(2000 – 2007)

World

2.5

5.3

4.9

4.3

U.S.

0.8

3.9

2.2

2.5

Euro Area

1.9

2.0

2.3

1.7

India

4.1

7.8

8.4

7.2

China

8.3

10.1

10.0

9.8

Source: IMF

  • Global Economy has been on an upswing since 2001
  • Emerging economies have grown faster than the developed economies


Leading to growing appetite for

  • Infrastructure
  • Consumables
  • Food
  • Power & Energy


This was supported by

  • Capital availability – both debt and equity
  • Low interest rates
  • Higher Income levels
  • Appetite for risk and diversification from investors
  • Money shifting partially to emerging economies

Presenting another Unique Theme & India’s First Natural Resources Fund
“Reliance Natural Resources Fund”


This fund will allow investor to participate in Indian and Global stocks of :

  • Minerals & Commodities
    E.g. Copper, Iron-ore, Zinc
  • Precious Metals
    E.g. Gold, Silver, Diamonds
  • Energy Resources
    E.g. Coal, Oil, Natural Gas, Uranium, Lignite
  • Non-conventional resources
    E.g. Air, Water, Solar
  • Agricultural Products
    E.g. Cotton, Wheat, Corn, Rice
  • Ancillaries to the above
    E.g. Component suppliers, Equipment suppliers
  • Other related companies


Rationale
The rapid economic growth in the emerging economies like India and China has tremendously increased the demand for Natural Resources like Industrial Commodities and Energy. With no new Mega reserves of coal, crude oil, natural gas, metals etc likely to be discovered in the foreseeable future the prices of Natural Resources are likely to remain high and may even go higher.
It is the Fund’s view that India’s growth model promises more stable, sustainable expansion and bigger returns for the investors. There exists a very positive view on the sectors like Agriculture, Manufacturing, Service and Natural Resources which contribute, substantially to our GDP. In our view all these four sectors simultaneously are looking quite attractive and bullish over a longer period.
The Indian Investor like his counterparts in the Emerging Economies is exposed to the economic risks associated with steep and rapid rise in the prices of Natural Resources. There is a need for an Investment Scheme that allows diversified participation to the Indian investors in the Natural Resources Sector.

Why invest in Reliance Natural Resource Fund?

  • From India’s No 1 Mutual Fund with an AUM of Rs 77,764.84 Crs* ( as on 30th Nov 07. Source : http://www.amfiindia.com)
  • An innovative product to compliment current portfolio of funds
  • Huge growth opportunity
  • Valuations attractive compared to potential growth
  • Diversified across resources – not a commodity play
  • Will invest in future growth areas – Agriculture, renewable resources, water, etc
  • Stocks do better than resources themselves

*Source: http://www.amfiindia.com

Outlook

  • Demand would continue to be strong
  • Sustained Infrastructure spending by economies such as India and China would mean tight markets
  • Natural Resources as an ‘asset class’ would only gain more prominence
  • Supply side constraints would remain
    • Inventories to remain at low levels making it difficult to have sustained surplus.
    • Supply would increase but at a lower pace due to significant past under investment
    • Bottlenecks such as lack of skilled manpower would prevent from all out supply glut
  • Prices to remain high
    • Capex costs and operating costs have risen pushing up the long-term prices
    • Higher industry concentration would mean better pricing discipline


    Why Global Diversification now?

    • So far, we felt India was a better investment option offering superior returns, a stand that has been vindicated by strong market performance in India
    • Going forward, merit in looking at opportunities outside India too
    • India does not offer play on many of the resources
    • Some of the global companies are available at attractive valuations
    • Many global companies are now in consolidation phase leading to interesting opportunities as M&A plays.
    • Global companies also offer larger scale plays


    Investment Strategy

    • The Fund invests principally in equity securities of issuers in natural resources industries.
    • The Fund may invest in securities of issuers located anywhere in the world and normally will invest in securities of companies listed on BSE, LSE, NYSE, TSE and ASX.
    • Companies in natural resources industries include companies that RCAM considers to be principally engaged in the discovery, development, production, or distribution of natural resources or are service providers to the Natural Resources Industry; the development of technologies for the production or efficient use of natural resources in addition also furnishing of related supplies or services.

    Natural resources may include, for example, energy sources, precious and other metals, forest products, food and agriculture, and other basic commodities.
    For understanding purpose, companies in natural resources industries may include, for example, companies that:

    • Participate in the discovery and the development of natural resources from new or conventional sources;
    • Own or produce natural resources such as oil, natural gas, precious metals, and other commodities;
    • Engage in the transportation, distribution, or processing of natural resources;
    • contribute new technologies for the production or efficient use of natural resources, such as systems for energy conversion, conservation, and pollution control;
    • Provide related services such as mining, drilling, chemicals, and related parts and equipment


    A particular company will be considered to be principally engaged in natural resources industries if at the time of investment at least 50% of the company’s assets, gross income, cash flow, or net profits is, committed to, or derived from, those industries. A company will also be considered to be principally engaged in natural resources industries if RCAM believes that the company has the potential for capital appreciation primarily as a result of particular products, technology, patents, or other market advantages in natural resources industries.
    Although RCAM may consider the factors described above in purchasing or selling investments for the Fund, it may purchase, sell, or continue to hold an investment for the Fund whenever it believes that doing so may benefit the Fund or on the basis of any of the factors described above or any other factors it may at its discretion consider. (Bombay stock Exchange Limited (BSE), London stock Exchange Limited (LSE), New York Stock Exchange (NYSE), Toronto Stock Exchange (TSE) and Australian Stock Exchange (ASX)).

    Download Form:

    Reliance Natural Resource Fund

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