DSP ML plans energy sector fund

DSP Merrill Lynch MF has mooted an equity fund that will invest in energy stocks in India, with a limited provision to invest in units of a couple of funds managed by Merrill Lynch internationally.
The proposed DSP Merrill Lynch Natural resources and New Energy Fund will aim at generating capital appreciation and providing long-term growth opportunities by investing in equity and equity related securities.
Two broad categories of companies will be chosen, the offer document filed with SEBI has mentioned. One, Indian companies selected whose pre-dominant economic activity is in the “discovery, development, production, or distribution of natural resources” – that is, energy, mining and the like.
Two, the fund’s investment universe will also have Indian companies that dabble in the “alternative energy and energy technology sectors”. The emphasis here will be on renewable energy, automotive and on-site power generation, energy storage and enabling energy technologies.
The fund will also invest a certain portion of its corpus in the equity and equity related securities of companies domiciled overseas (which are chiefly engaged in the discovery, development, production or distribution of natural resources and alternative energy) and/or units of Merrill Lynch International Investment Funds – New Energy Fund and Merrill Lynch International Investment Funds – World Energy Fund. Similar other overseas investment vehicles may be selected too.Benchmark
The fund’s benchmark will be somewhat unique: 35 per cent in S&P CNX Energy, 30 per cent in BSE Metals and 35 per cent MSCI World Energy, the offer document has stated, adding that the fund manager will pick up equities on a bottom-up, stock-by-stock basis, with consideration given to low price-to-earnings, price-to-book and price-to-sales ratios. Besides, growth, margins, asset turns and cash flows will be considered.
At least 65 per cent of the portfolio will be exposed to equity and equity related securities of companies domiciled in India. Likewise, under normal market conditions, not more than 35 per cent of the portfolio will be invested in companies domiciled overseas.