Sundaram BNP rolls out three-year Energy Fund

Mutual funds are all set to capture the buoyancy in the energy sector. The latest to join the bandwagon is Sundaram BNP Paribas Mutual Fund, which is coming out with a three-year, closed-ended new fund offering 'The Energy Opportunities Fund'.

The fund will invest in equity and equity-related instruments of companies focussed on the energy space or those directly or indirectly benefiting from it.

The NFO from the South-based fund house comes close on the heels of UTI Mutual Fund's recent tweaking of its UTI-GSF-Petro Fund into UTI Energy Fund for broadening its investment mandate to tap the growing potential in the energy sector.

With demand for gas growing at 9-10 per cent Compounded Annual Growth Rate (CAGR) in the next five to ten years and domestic gas supply set to grow more than 100 per cent in the next two years, fund managers are bullish on the prospects. In fact, even equity diversified funds have stepped up their exposure to energy stocks.

Sundaram BNP's NFO will be close-ended since the fund house said there can be substantial value creation if investors invest for a timeframe of three to five years.

However, the fund will attract no entry or exit load, which means that investors can seek redemption on any working day. The new fund offering opens on November 12 and closes on December 11 and will have no capitalization bias.

The bullish view on the energy sector has prompted fund houses to launch these funds, though some have funds investing in infrastructure and capacity expansion stocks.

S Krishnakumar, head-research and fund manager, Sundaram BNP Paribas Mutual Fund, said its investment horizon would be specific to energy and derived stocks.

Fund managers said the fact that there are several stocks to invest along the value chain has contributed to the attractiveness of the sector.

"There are around 250 good stocks available to invest within this space. We are also looking to invest in the alternate energy and power and coal space," added Krishnakumar.

UTI's fund will invest in stocks in the oil and gas sector covering companies engaged in drilling, exploration, refining of crude oil and distribution and in power generation companies (power generation, transmission, distribution and power trading & companies involved in consulting and financing these businesses), energy storage and distribution companies and equipment manufacturers for the energy sector.