Closed -Ended Mutual Fund Schemes
by Mr. Niranjan
Risbood, Director Manager Research, Morningstar India
Closed - ended mutual
fund schemes give the fund manager the confidence to invest, without the fear
of redemptions in between.
As a result, he can
take a long-term call on companies he/she likes.
Investors should,
however, note that their money gets blocked for the tenure of the fund, and
they should be comfortable with the illiquid nature of the investment.
Also, some basic due
diligence - the fund manager, his/her
track record, the AMC’s culture of managing money & the manner in which the
scheme is going to invest - is important while deciding to invest in such
schemes.
In terms of
valuations, the markets are currently trading at 16 to 17X forward earnings,
which is marginally above the average that India has historically traded at.
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