Fidelity's first fixed income fund

NFO REVIEW

Fidelity Fund Management has come up with its first ever fixed income fund in India at a time when equity markets have turned highly volatile and may continue to be so for some time to come. Fidelity already manages three equity funds and a multi manager cash fund.

The new Short Term Income Fund is an open-ended income fund that would invest in a diversified portfolio of fixed income securities (debt and money market).

It aims to offer an opportunity to earn reasonable returns over shorter periods of time even as an investor's overall portfolio works towards creating wealth over the long term. It has the option to invest up to 100 per cent of the net assets in derivatives for the purpose of hedging.

Ashu Suyash, managing director & country head said, "With the launch of the Short Term Income Fund, we will be able to offer all three asset classes of equity, fixed income and cash, to Indian investors. Fixed income assets are a good diversifier of equity market risk."

Fidelity's approach to fixed income investing spans asset allocation, yield curve positioning, interest rate expectations, sector allocation, issuer credit analysis and security valuation. The fund will be managed by Sameer Kulkarni, fund manager-fixed income.

"Fidelity Short Term Income Fund will play into the current steepness of the yield curve from a risk-return perspective. Our multi strategy approach balances the many factors that affect bond prices and our portfolios actively exploit the opportunities through a number of lowly-correlated positions," says Kulkarni. It may be noted that during Kulkarni's tenure at Templeton, funds under his management had posted good returns.

The Short Term Income Fund NFO will be open from 17 to 24 August. It will have an institutional and non-institutional plan and each plan will offer growth and dividend options.

The minimum investment for the institutional plan is Rs 5 crore, while that for the non-institutional plan is Rs 5,000. The fund does not levy any entry or exit loads. Its expense ratio stands at 0.8 per cent for the institutional plan and at one per cent for the non-institutional plan.

Fidelity Fund Management is the Indian arm of Fidelity International, which has offices in over 20 countries across Europe and the Asia-Pacific. Fidelity International along with its US affiliate, Fidelity Management and Research Company, covers about 95 per cent of world market capitalisation.

The fund could be a useful cash management product for both institutional and retail investors, though the fund does not offer anything very different from the others.