Monday, July 29, 2013

Morgan Stanley Ultra Short Term Debt Fund

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Call 0 94 8300 8300 (India)

 

The scheme will invest 100% in a mix of money market and debt instruments

FEATURES:


It is an open-ended debt fund almost equivalent to a liquid fund, although the asset management company (AMC) launching it, Morgan Stanley Investment Management (MSIM), already has a liquid fund in operation. The new fund offer period of Morgan Stanley Ultra Short Term Debt Fund (MSUSTDF) is from July 17 to July 24, a period of eight days only.


ASSET ALLOCATION & BENCHMARK:

 

The fund's scheme information document (SID) states it will invest 100 per cent in a mix of money market and debt instruments, with the scheme portfolio having an average maturity of less than a year. No further break-up of the mix is given in the fund's SID except for a qualifier stating debt instruments could include domestic securitised debt up to 50 per cent of the scheme corpus. The fund is benchmarked to Crisil Liquid Fund Index (CLFI).


CHARGES & OTHER FEATURES:

 

Annual recurring charges can be up to the highest allowed by Sebi for such funds (2.25 per cent). An additional 0.50 per cent can be imposed, as allowed by Sebi, for getting inflows from be yond 15 top cities and if other Sebi-imposed con ditions imum are met. The min investment amount is Rs 5,000.

MSIM al ready has a bouquet of fixed income funds including a liquid fund, a short-term bond fund and an active bond fund. MSUSTDF, therefore, makes the scenario very confusing for new investors. This is more so since the fund has kept the option to invest in money market and debt securities ranging from 0 to 365 days. A question mark arises on how MSUSTD not end up competing with MSIM's own liquid fund, short-term bond fund and active bond. While such a scenario is not unique to MSIM and several other AMCs also have the same range of options in their fixed income product offering portfolio, it still raises concerns for investors as it does for investors in the debt funds of those other AMCs. The performance track record of MSIM's comparable debt funds has, however, been decent. A Financial Chronicle Research Bureau analysis based on Capitaline NAV database of one-, twoand three-month returns of Morgan Stanley Liquid Fund (MSLF), along with 53 other liquid funds, revealed MSLF to rank 10th, 12th and 11th, respectively. The portfolio of MSLF , having the same benchmark of CLFI as MSUSTDF, had an average maturity of 45 days. Another fund from the same AMC, Morgan Stanley Short Term Bond Fund, having an average portfolio maturity of 516 days, was ranked 11th, eighth, eighth and sixth in nine-, 10-month, 11-month and 12-month returns, in a universe of 48 short-term debt funds.

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