DSP Merrill Lynch expects to raise Rs 75-80 cr in Gujarat

DSP Merrill Lynch Fund expects to raise 10 per cent from the Gujarat market of the target of Rs 800 crore it aims to raise from the Indian market.

Speaking to the media at the launch of the DSP Merrill Lynch World Gold Fund in Ahmedabad, Anup Maheshwari, executive vice president, head of equities and corporate strategy, said, "We expect to raise Rs 75-80 crore from the Gujarat."

The fund expects to raise Rs 800 crore from the overall market in India. The fund collected will be invested into the parent company's fund "" Merrill Lynch International Investments Fund - World Gold Fund (MLIF - WGF) and nearly 2-3 percent will be managed by the DSP Merrill Lynch to maintain liquidity for some redemption if required.

DSP Merrill Lynch World Gold Fund is fund to fund scheme, where in the DSP will be investing the money raised through these mutual fund scheme into the the fund of its parent company's mutual fund 'World Gold Fund'.

The World Gold Fund of the Merrill Lynch is a fund, where in the the money is invested into the stocks of the gold mining companies and not into the gold directly.

Speaking on the occasion of the launch, Maheshwari, said, "Gold bullion has traditionally been a favoured saving instruments for the Indian household. DSP Merrill Lynch World Gold Fund with offer Indian investors the opportunity to benefit from the likely increase in the gold prices and significantly enhance their return potential as compared to investing in physical gold or gold ETFs."

The fund is an open-ended fund-of-funds scheme investing in gold mining companies through an international fund with a primary investment objective of seeking capital appreciation by investing predominantly in the units of Merrill Lynch International Investments Fund "" World Gold Fund (MLIF - WGF). This scheme is open ended and not an Exchange Traded Fund.

Its MLIF-WGF was launched in 1994 and currently manages assets of over $5.4 billion (over Rs 21,000 crore). For the last 12 years, the fund's annual growth rate has been 14 per cent and for last three years it has been growing at 21 per cent.

The MLIF- WGF has exposure to 52 stocks in its portfolio, of which 25 per cent of the stocks are from South Africa.

According to the company, the investor should invest in gold mining companies, as in the last few years gold prices witnessed a steady rise due to the increasing demand "" supply gap. Profitability of gold mining companies tends to increase with a rise in the price of gold. This had enhanced the possibility of superior performances and dividends.

Thereby investing in a scheme which invests in shares of gold mining companies provides access to the fund manager expertise and active fund management, which is not available in the case of gold ETFs or gold bullion.

Also investing in gold mining companies offers investors the upside opportunity through organic/ M&A growth and leverages on the increasing prices of gold.

The price of gold is likely to be supported by robust demand and limited supply of gold. The robustness in demand is fuelled by the strong jewellery demand from Asia and West Asia.