Tuesday, August 27, 2013

GOLDMAN SACHS CNX 500 Fund Capital appreciation

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This fund GSC500F aims for by deploying its corpus in the 500 companies

WHAT IS IT?

 

It is a four-year-and-seven-month-old open-ended index fund and the only index fund that tracks the broadest index available for fund managers: the CNX 500 of NSE. BSE, too, has a similar index, BSE 500, but no index fund is tracking it at present. Even among other index investing options, index exchange traded funds (ETFs), none tracks either of these two broadest indices.


ASSET ALLOCATION:

 

As per its declared asset allocation plan, Goldman Sachs CNX 500 Fund (GSC500F) invests 90-100 per cent of the corpus in equities and 010 per cent in money market instruments.


SCHEME OBJECTIVE:

 

Capital appreciation is what GSC500F aims for by deploying its corpus in the 500 companies that make the CNX 500 index in the same proportion as they officially weigh in the index based on their free-float market capitalisation.


Investors seeking equity exposure through mutual funds and who prefer passive in vesting to active investing, an index fund on the ideal; broadest available index is and GSC500F is the only one available to them today. Portfolio con centration levels are lower in CNX 500 com pared with CNX Nifty or CNX 100. As of June-end, the top 10 holdings of the index funds or index ETFs tracking Nifty and CNX 100 would have gobbled up 60 per cent and 50 per cent of their corpus, respectively, whereas GSC500F , a CNX 500 index fund, had deployed a lower proportion of 40 per cent in the top 10 holdings.


This is despite the fact that the 10 largest weighted stocks in each of these three indices are the same.

 

Obviously, since CNX 500 has a far larger universe, the impact of the largest weighted stocks is diluted. For investors neutral to passively-managed index funds and actively-managed equity diversified schemes, GSC500F is neither a better or worse option. This was revealed in an FC Research Bureau comparative analysis of the performance of GSC500F and 15 actively-managed equity diversified schemes (excluding sectoral and thematic funds) having CNX 500 as their benchmark indices.

Based on their August 8 net asset values, the compounded annual growth rate of returns for one year, two years and three years were arrived at and averaged for the analysis. While GSC500F's average CAGR of return was zero per cent (compared with around 1.2 per cent of CNX 500 Total Returns Index), the average CAGR among the 14 analysed equity schemes ranged from 10.9 per cent to 5.1 per cent with their collective average coming at 0.4 per cent. The difference between this average and GSC500F's average is not very big.

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