"Prabhu Smart Fund" a Smart Investment Option With Average Annualized Return of 25.58% and a Total 255.75% Return During its Life: CIO Durga Nand Jha, Prabhu Capital

Thu, Mar 2, 2023 11:59 AM on Mutual Fund, Interview,

Prabhu Smart Fund is the second mutual fund scheme under the Prabhu Capital Limited. The scheme was approved by the SEBON on 19th Poush, 2079. The Fund NFO is open from today i.e. 18th Falgun to 23rd Falgun 2079. Here is a brief discussion with Mr. Durga Nand Jha, Chief Investment Officer of Prabhu Capital regarding the new scheme and its features.

What was the idea behind the Prabhu Smart Fund?

Prabhu Smart Fund is the second mutual fund scheme under Prabhu mutual fund with a maturity of 10 years. The scheme has been constructed with the idea to deliver a steady return to the investor during the life of the fund. Prabhu Smart Fund will deliver a consistent dividend of 10% from its second- and third-year’s profit and 12% thereafter to the maturity of the fund to its investors.

We have witnessed the volatility and the pain in the capital market during the bear cycle of the market. Therefore, the fund was created to provide a long-term hassle-free value addition to its investment portfolio through adequate research and analysis. Prabhu Smart Fund is the second fund under the management of Prabhu Capital after the Prabhu Select Fund, which has been able to protect the NAV of the fund even during the tough time. Prabhu Smart Fund is established to build steady wealth for the investor by implementing the perfect blend of risky and moderately risky assets in the portfolio at the best price.

What are the main features of Prabhu Smart Fund?

Prabhu smart fund is a closed-ended mutual fund with a fund size of 80 crores. The fund has received the seed fund money from the fund sponsor - Prabhu Bank and the fund manager – Prabhu Capital. Prabhu smart fund has a maturity of 10 years starting from the fund allotment date. Being a closed-ended fund, Prabhu smart fund will be traded in NEPSE and will provide liquidity to the investors.

The minimum investment amount of the fund will be 100 units, while the maximum investment amount will be 10% of the fund size. The fund has a par value of Rs. 10 per unit. Prabhu smart fund has projected to deliver an average annualized return of 25.58% and a total 255.75% return during its life. The fund will be an equity-oriented mutual fund where the major allocation will be made into equity and equity-related instruments, while the fixed income and debenture investment will bring stability and consistency to the return in the portfolio.

How does the fund distinguish it from the Prabhu Select Fund?

As we all know, the Prabhu Select fund was established to invest in the best 30 scrips, while excluding the primary market investments. Whereas the Prabhu Smart fund doesn’t have any limit on the number of investments of any kind. The investment of the fund will be based on the fund manager’s investment policy while complying with the regulatory limits and scope of investment. The Prabhu Select fund was introduced during the last bull market of NEPSE when the index was trading above the 2,800 level. However, the Prabhu Select fund was able to protect the NAV of the fund notwithstanding a bear market. The strategy opted by the fund manager has comprehended the fund to outperform the broad market index as well as its peers.

Prabhu Smart Fund will go through a similar investment decision-making process, while more focus will be given to Fund’s NAV stability with the right investment selection and allocation strategy.

How was the journey of Prahu Select Fund has been so far?

Prabhu Select Fund is the first mutual fund scheme under the Prabhu Mutual Fund with an AUM of above 1.32 Arab as of Poush end, 2079. The market has gone through a roller-coaster bear market journey right after the fund’s inception. However, the fund has been successful in protecting client investment through the proper fund allocation and selection strategy during the downturn.

The performance of Prabhu Select Fund has been broadly flattish even during the bear market. NEPSE performance after the fund inception has been -23.66 %, while the Prabhu Select Fund NAV has been 10.42 (added 4.2%) as of the reported data of Poush end, 2079. When compared with its peer based on the drawdown in NAV, Prabhu Select Fund has been among the best-performing mutual fund.

What are the objectives of Prabhu Smart Fund?

Prabhu Capital, as a fund manager of Prabhu Smart Fund, is confident of adding value to the client’s investment. Prabhu smart fund will identify the hidden gem stock at the right valuation to the portfolio and deliver a consistent return while taking minimal downside risk. Prabhu Smart Fund will provide a hassle-free investment opportunity to the investors and will help the unit holder to make long-term capital appreciation along with a steady return through cash dividends.

Keeping an eye on the volatility and the changing investment dynamics, Prabhu Smart Fund will make adequate research and analysis to make any investment. The Fund management team holds a strong investment banking background, which will identify the scrips at a good value along with better growth prospects. The fund is committed to adhering to the target investment allocation across the assets class to keep a balanced investment approach. The fund will deliver an annualized return of 25.58%, which includes capital appreciation along with the cash dividend. 

What is the investment philosophy of the Prabhu Smart Fund?

The investment Philosophy of the Prabhu Smart Fund lies on the four basic pillars:

  1. Disciplined Approach: The fund will adopt a disciplined approach toward the investment. The fund will only invest when the investment criteria of the fund manager are duly fulfilled. The fund management team will follow the fund allocation strategy and the stock selection strategy as per the plan.
  2. Strategic Asset Allocation with optimal diversification: The Fund will follow the strategic assets allocation strategy to get the best diversification. The strategy will help the fund to get the best risk-adjusted return in the long term.
  3. Long-term investment with compounding returns: The mutual fund investment is a long-term approach, so the fund will be able to deliver a higher return in long term. The fund will add value through compounding and capital appreciation.
  4. Quality companies at a reasonable price: One of the philosophies of the fund is choosing quality companies for the investment at a reasonable price. This will help the fund to reduce volatility while helping the fund to reap a higher reward.

How will an investor benefit from the investment in this fund?

The fund will cater to the investment need of an investor in the capital market. The fund will help the investor to buy up to 8 million units of the Prabhu Smart Fund through NFO. The investment in the scheme will also help the investor to make a hassle-free investment, which will help them to focus on their business, while the fund will be managed by the experts.

Prabhu Smart Fund is projected to provide consistent dividends and capital appreciation to the unit holders. The current market scenario is quite challenging and volatile, where the rewards are hidden in the lap of proper risk management, and the current investment in the capital market is necessitated by professionals. The professional team of the fund manager is very competent to provide a higher risk-adjusted return on the client’s investment. If we talk about our previous scheme, we have been able to deliver positive value to the client investment while the overall market has been bleeding.  

What will be the stock selection and fund allocation strategy of the Prabhu Smart Fund?

As you know by now, Prabhu Smart Fund will opt for the balanced approach to asset allocation. The fund will invest in equity, fixed-income, and cash instruments. The balanced approach to equities allocation will be based on the fund objective to keep the minimal risk while betting on the scrips which can deliver a good return in the medium to long term. The stock selection as well as the sector allocation strategy will be backed by sufficient research under the guidance of fund supervisors.

The stock selection strategy of the fund will be based on the fund manager’s internal policy, which will be tilted toward identifying the value stock (the good company at the right price) along with the good growth prospects. The fund manager has the internal stock selection policy; which is based on the company’s financial health, company growth prospects, relative valuation with peers, macro as well as micro prospects of the economy, sector, and companies, etc. So, we make a comprehensive analysis of the business and investment environment before investing.

Why should an investor invest in Prabhu Smart Fund?

Prabhu Smart Fund will be the best investment opportunity for the general investor. The fund will deliver a handsome return of 255.75% in its lifetime. The investor should take the fund as a long-term investment opportunity to reap the higher possible reward. The fund is expected to witness two bull cycles in its life of 10 years, where the fund can deliver a sufficiently high return to its unit holders. The fund will be a good investment avenue not only for new investors but also for experienced investors.

Mutual Fund investment has been a good investment option when we compare the return of it with the FD rate of returns of the commercial banks. The Mutual fund has delivered a sufficiently higher return than the FD rates. Also, if we talk about our track record, Prabhu capital has been the leading merchant bank in the country along with a glorious track record of more than 10 years in the investment banking domain and we are quite sure that we will keep our legacy through this scheme.

Who are the Fund Supervisors of Prabhu Mutual Fund?

Prabhu Mutual Fund has a team of 5 fund supervisors, who have sufficient knowledge and experience in the capital market. The Fund Supervisor team is comprised of 5 people:

  1. Yogendra Gauchan: Mr. Gauchan is an MBA graduate and a retired joint secretary of GoN. He has ample experience in the government and chamber of commerce and industries.
  2. Arjun Lal Rajbanshi: Mr. Rajbanshi is an MBA graduate in economics and econometrics. He also has made a significant contribution to the Nepalese capital market. He was an Acting Executive Director, Chief of Finance, and Service of CIT.
  3. Sabin Bikram Panta: Mr. Panta is an MBA graduate and has been associated as an associate professor at Kathmandu University for more than 13 years.
  4. Madan Kumar Niaraula: Mr. Niraula is an FCA and holds more than 18 years of experience in Auditing, Accounting, Taxation, etc.
  5. Narayan Desar: Dr. Desar is a Ph.D. graduate in Finance and carries more than 11 years of capital market experience.

What is your market outlook and how confident are you about delivering the projected return?

We are quite confident of delivering the projected return to the investors of Prabhu Smart Fund. We have witnessed the bull market back in 2021 and it has been more than a year and a half now since the market has been correcting. The current position of the market looks comparatively safer than the valuation it was back one year. We also witnessed the sufficiently restrictive fiscal and monetary policy as the economy was heated and unexpected to meet the target growth rate. Both domestic and global events have contributed to unfavorable scenarios for risky assets. We are expecting that the market will witness a less restrictive policy from the NRB sooner or later. The risk-to-reward ratio at the current time looks much better and I think this can be a good time to make a long-term investment. And for hassle-free long-term investment, what else can be a better investment avenue than the Mutual Fund!