The New Fund Offer (NFO) opened on September 23 and will close on October 7. Investors need to meet the minimum aggregate investment requirement of ₹10 lakh across all investment strategies offered under the Titanium SIF at the PAN level.
The fund will follow a predominantly market-neutral approach, with the portfolio designed to reduce its dependence on the directional movement of any single asset class. It can use equity and commodity arbitrage, fixed-income accrual, derivative strategies and selected special situations as different sources of potential returns.
Under the scheme mandate, equity, including REITs, can account for 35% to 100% of the portfolio, while debt and money-market instruments can range from zero to 65%. Commodity derivatives can account for up to 30% of the portfolio. The scheme can also take tactical exposure of up to 20% to InvITs.
The fund can have unhedged short exposure of up to 25% through permitted equity and debt derivatives.
A key part of the strategy is cash-futures arbitrage, under which equity positions can be hedged using futures contracts. The strategy seeks to capture the price differential between the cash and futures markets while reducing exposure to the overall direction of the equity market.
The scheme can also use commodity derivatives for arbitrage opportunities. Debt and money-market instruments are expected to provide accrual income and can also support margin requirements for derivative positions.
Other permitted strategies include covered calls, pair trades and collars. The fund can also participate selectively in special situations such as initial public offerings (IPOs) and merger opportunities, subject to the fund manager’s assessment of the risk-reward profile.Hemant Kumar, chief business officer at Tata Asset Management, said the strategy combines equity, fixed income, commodity derivatives, arbitrage and derivatives within one portfolio, with a focus on managing downside risk and portfolio volatility.
Sailesh Jain, fund manager at Tata Asset Management, said the fund would not be dependent on equity markets rising or on a single asset class performing well, and would instead use different strategies as potential return drivers.
The fund will be benchmarked against a composite index comprising 35% BSE 200 TRI, 50% CRISIL Short Term Bond Fund Index and 15% iCOMDEX Composite Index.
Subscriptions to the strategy will be available daily, while redemptions will be available weekly on Mondays. An exit load of 1% will apply if investors redeem or switch out on or before one month from the date of allotment. No exit load will apply thereafter.
The Titanium SIF is aimed at investors seeking differentiated investment strategies, with a minimum aggregate investment of ₹10 lakh across SIF strategies at the PAN level with the asset management company.