Fidelity launches contra fund

Investing in the stocks of companies which are not actively traded currently, but have good growth potential in the future, seems to be the flavour of the season for asset management companies (AMCs).

Such an investment strategy is called 'contra' (contrary to investing in stocks that are actively traded). In the last three months, two asset management companies - Cholamandalam and UTI - launched contra funds. The latest to join the bandwagon is Fidelity Fund Management which has announced the launch of Fidelity India special situations fund.

The major reasons for the AMCs to launch contra funds are the new segment of stocks that will be tapped and the willingness of the retail investors to stay invested for over one to two years in the same fund for better earnings.

This is an open-ended equity fund that aims to deliver long term growth by investing across the spectrum of Indian equities with a focus on companies in special situations.

Addressing a press conference, Rajesh Singh, Fidelity India special situation, said "Special situation funds pick stocks of companies based on potential performance in future based on opportunities."

This special situation fund would hold close to 40 to 60 stocks. The new fund offer is open from March 28 to April 26, 2006.

The minimum amount for lumpsum investments is Rs 5,000 and multiples of Rs 1,000. The entry load is 2.25 per cent for each purchase of less than Rs 5 crore. For amounts greater than or equal to Rs 5 crore or dividend reinvestment, there is no entry load. There is an exit load of one per cent for redemptions within the first six months for non-systematic investment plan investments.