Think global, act local

FUND IPO

Chola Global Advantage Fund is worth a look, given the pace of globalisation and India's increasing share in the world economy.

Chola Global Advantage Fund, the new offering from the stable of Cholamandalam Mutual Fund, is an open-ended diversified equity fund.

It will invest in domestic companies which are expanding their businesses in global markets and are expecting - or already have - at least 20 per cent of turnover from exports of goods and services from the next three years.

The fund believes that companies which are increasing their footprints in the global markets have higher growth in sales, profit and market cap compared to others.

Many of these companies have strong domestic businesses which will enable them to benefit from the improvement in domestic economy as well. Thus the fund aims to capture the domestic growth of these companies also.

The fund has plans to look beyond sectors like IT services, pharma, auto ancillaries and textiles where a majority of companies with a global presence belongs.

However, companies with high exports are likely to be more volatile as well given the intangibles that affect global economy. The concept of investing in globally competitive Indian companies with high exports is nothing new.

Birla Mutual Fund's India Opportunities Fund and Kotak Mutual Fund's Global India Fund are two comparable schemes in the category. While the former invests in foreign exchange earning companies, the latter invests in globally competitive Indian companies as well.

The one-year returns of these two schemes have been pretty decent (20.26 per cent and 31.82 per cent respectively), though far behind leaders in the diversified category who have given returns close to 50 per cent.

The funds have beaten their respective benchmarks (CNX 500 at 10.72 per cent and the BSE Sensex at 7.56 per cent). Chola Global Advantage fund will loosely benchmark itself against the BSE 500 (11.15 per cent).

The performance of Chola Mutual Fund's other equity funds has been decent enough in the past, though the fund has mostly been a middle-of-the-table performer. 
 

Chola equity funds (Returns in % as on April 20, 2005)
Scheme	3 months	1 year	3 years
Growth Fund	3.62	19.55	37.74
Midcap Fund	9.98	-	-
Oppor. Fund	3.42	22.46	14.15
Source: www.mutualfundsindia.com

Its large-cap fund, Chola Growth has managed returns of 37.74 per cent and 62.26 per cent over a three-year and two-year period respectively, while the recently launched Midcap Fund has given a return of 26.67 per cent for the past six months.

Given the pace of globalisation and India's increasing share in the world economy, the fund is worth a look.

"Companies' business models matter"

What will be your stock selection criteria?

We identify stocks with the potential of large valuation upsides or higher growth. We will favour companies with enduring business models.

How do you rate the fund in terms of its risk-return profile?

The portfolio structuring would aim at controlling risk at moderate levels. Among our equity portfolio, the fund will rank above Chola Growth Fund and Chola Multi-cap Fund in terms of risk-return, but will be lower than our Midcap Fund and Opportunities Fund.

How many stocks will be there in your portfolio?

We have identified around 125 stocks which fall into the category of firms expecting more than 20 per cent of revenues from exports. The portfolio will consist of 30-35 stocks.