Kotak Mutual Fund Files for S&P BSE PSU Index Fund with SEBI

What is Kotak S&P BSE PSU Index Fund?

Kotak S&P BSE PSU Index Fund is an open-ended scheme designed to replicate or track the S&P BSE PSU Index. The fund aims to provide investors with long-term capital growth and returns that align with the performance of the S&P BSE PSU Index, subject to tracking error.

Plans Available

The scheme offers two types of plans:

1. Regular Plan: This plan is for investors who prefer to invest through a distributor. It provides the traditional route of accessing mutual fund investments through intermediaries.
2. Direct Plan: This plan is designed for investors who prefer to invest directly with the mutual fund, without using a distributor. Direct plans often have lower expense ratios due to the absence of distributor commissions.

Both plans will have a common portfolio, ensuring that the underlying assets are the same regardless of the plan chosen.

Options Within the Scheme

Investors have a choice of three options for managing their returns:

1. Growth: Accumulated gains are reinvested into the fund, potentially providing compounding benefits over time.
2. Payout of Income Distribution cum Capital Withdrawal (IDCW): Investors receive periodic payouts from the fund.
3. Reinvestment of Income Distribution cum Capital Withdrawal (IDCW): Income distributions are reinvested back into the fund, allowing for potential growth.

Scheme-Specific Risk Factors

Investing in the Kotak S&P BSE PSU Index Fund comes with specific risks. A key risk is tracking error, where the scheme’s returns might deviate from the S&P BSE PSU Index due to various factors like delayed realisations, cash for redemptions, or transaction costs. The scheme invests at least 95% of its net assets in securities that comprise the index, which means changes in index composition could lead to sudden adjustments in the scheme’s holdings.

The scheme is passively managed, meaning it does not actively select stocks based on their investment merit but tracks the index. This approach can lead to exposure to general market declines and does not allow for defensive positions in falling markets.

Overall, the Kotak S&P BSE PSU Index Fund offers a new avenue for investors interested in aligning their investments with the performance of the public sector companies included in the S&P BSE PSU Index. However, potential investors should consider the risk factors before investing.

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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.