New fund is for retail, HNIs, corporates: ABN AMRO MF

Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » RELATED NEWS ABN AMRO AMC launches ABN AMRO Sustainable Development Fund ABN AMRO Equity Fund declares 60% dividend Nifty BSE | NSE 25/05/12 Are Mutual Funds betting on Nifty?

ABN AMRO Mutual Fund is launching a new fund called the Sustainable Development Fund. This would invest in companies which score high on parameters like environment friendliness and corporate governance.

Prateek Agarwal, Head - Equities of ABN AMRO Mutual Fund says that for the first time the environmental, social and governance issues have been taken into account which also provides a quantum of risk into stock investing.

Excerpts from CNBC-TV18's exclusive interview with Prateek Agarwal:

Q: Outline the nature of this fund and what are the parameters that you use to choose stocks for this fund?

A: With this fund we are launching the SRI (Sustainable and Responsible Investment)  into India. This is the first SRI based fund in India. We have recognized for the first time the environmental, social and governance issues which also provides a quantum of risk into stock investing, so after that we have taken cognizance of this risk. What we did was to give CNX 500, set of stocks to CRISIL which is an S&P accredited agency and told them to rank these stocks on the ES&G parameters.

 

So CRISIL devised something like 200 odd questions and quote each one of these companies on ES&G framework, after which we normalize this quotes for the industry and knocked off everything, which was below the median values to finally arrive at something like 245 companies, which will form the universe for investing into this fund. So that is basically the step up in the process which we have done for this fund.

 

Q: What kind of investor should be looking at investing in this kind of fund?

 

A: This fund is for everybody but apart from the retail and the HNI categories, maybe the corporates should also look at this fund more closely.

 

Q: What sort of sectors you have zeroed in on? What sort of companies or sectors are we talking here?

 

A: This is not to be mixed with an ethical kind of a fund wherein you are excluding a certain number of sectors. Here we have not excluded any sectors, we quote companies and then normalise these quotes according to the sectors so that we have a reasonably good representation across sectors. There is no sectoral bias in the 245 sets of companies that we have.

 

Q: Eventually how big are you looking to make your portfolio in terms of number of stocks and how much are you looking to raise via this fund when its eventually completed?

 

A: This is a close ended fund, the numbers would come in closest on 30th, so you will get to know the numbers then. But as far as the portfolio goes, ours typically is between 30-45 stocks, so this portfolio will also be between 30-35 stocks.

 

Q: Can you give us a sample of the companies which have been included in the 240 samples that you have got?

 

A: We are not talking names; obviously companies which will form part of the initial portfolio would be comprising the universe. Frankly, a lot of the media space companies, the software space, the banking space, the larger manufacturing companies will all be there. Just to tell you the bias that one may have in mind, it could be that the midcaps may have a lower representation, that is not the case also actually, close to 50% of the universe would be midcapish.

 

Q: What is the rationale for an investor to invest? Is it that such companies will automatically have good corporate governance? Why should an investor invest in this?

 

A: When you are scoring companies on environmental, social and governance issues, governance is part of it. If you look at the corporate history over the past 5-6 years, on these issues we have had companies whose valuations have been hit pretty drastically. So those are the kind of risks we are seeking to minimise for the investors.