UTI woos overseas Indians with new gold, equity-based fund


Dubai : Even as the world grapples with a financial crisis, India’s UTI Mutual Fund has launched a new product that will offer overseas Indians a chance to invest in equities and gold.

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The UTI Wealth Builder Fund Series II, launched here, offers overseas Indian investors an opportunity to gain from combined strengths of equities and gold to build a long-term diversified portfolio, according to a UTI statement.

There are around 4.8 million expatriate Indians in the Gulf and 1.5 million of them are in the United Arab Emirates.

The new fund is aimed at long-term capital appreciation through investment predominantly in a diversified portfolio of equity and equity-related instruments along with investments in gold exchange traded funds (ETFs) and debt and money market instruments.

“The launch of this fund comes at a critical moment. With current market uncertainties, what investors need is more genuinely ‘counter cyclical’ or low-correlated asset classes that they can add to their portfolios,” Harsha Upadhyay, fund manager and vice-president of UTI Asset Management Co, said in the statement.

“If one of your primary objectives is to earn positive investment returns while having a low probability of incurring losses in a reasonable timeframe, one must (also) look for asset classes that behave differently in diverse economic cycles,” he said.

According to Upadhyay, gold is one such asset that is counter-cyclical in nature and hence an ideal asset for use in portfolio diversification.

“The UTI Wealth Builder Fund Series II is the first of its kind to offer an asset allocation combining traditional as well as non-traditional asset classes,” he said.

“By providing exposure to alternative asset class, the fund offers common investors a strategy traditionally reserved for high net worth (HNIs) or institutional clients,” he explained, adding that the fund would provide a hedge against extreme volatility while assuring reasonably attractive returns.

The fund takes gold exposure through gold ETFs, which give an investor the advantages of investing in gold while eliminating drawbacks of physical gold such as storage cost, liquidity issues and concerns over purity and safety.

The fund is an open-ended equity-oriented scheme and the units will be sold at face value of Rs.10, plus load as applicable, in the new fund offer period.

The minimum initial investment amount is Rs.5,000 and in multiples of Re.1 under the regular plan, and Rs.10 million and in multiples of Re.1 under the institutional plan. The issue closes Nov 19, 2008.

Speaking about the effects on India from the global financial crisis sparked by a credit crunch in the West, Upadhyay said the Indian growth story was still intact as the fundamentals remained very strong and only 13 percent of India’s gross domestic product (GDP) was dependent on exports.

“The recent fall in Indian stocks is mainly driven by sentiment and is not based on fundamentals,” he said.