Wednesday, July 22, 2009



Srikanth Shankar Matrubai

DSP BlackRock World Energy Fund is a very interesting Fund.
DSP BlackRock's World Energy Fund opens for subscription on July 10 and closes on July 31. This feeder fund feeds onto two global funds. The Fund will invest in BlackRock Energy Fund and BlackRock New Energy Fund which have had a good track record for more than 9 years now.

It is widely accepted going forward, Crude prices will higher and higher because of the ever widening Demand-Supply Gap. Energy Stocks valuations are at multi year lows and the Fund is launched to seize on the Opportunity to acquire stocks at these low levels. This coupled with Crude upside linkage should prove to be a good bet for investors.
Oil was earlier available in Ground, but now only in High Seas, which is making Oil cost inch up higher and higher. The days of Cheap Oil is over.
The Feeder Fund seems to have a bias towards the Exploration and production side rather than the Refining and Marketing part, which is understandable given the low margins in Refining. The Feeder Fund has good exposure in Well known Large Caps like Exxon Mobil, Shell, Chevron, BP Cairn Plc (not Cairn India) and alternate Energy Stocks like Vestas, Suzlon.
Oil companies in India are governed by administered pricing, therefore they cannot benefit from rising oil prices. But global oil companies enjoy considerable pricing flexibility. This Fund aims to capture that.

Along with the Energy part, the Fund also seeks to invest in BlackRock New Energy Fund which is again quite a interesting theme. The New Energy which consists of Solar, Wind, etc is the only Sector in the World which has been mandated by Govt to GROW.
In 2008, for the First time in History, Installed Capacity for Alternate Energy was MORE than the Installed Capacity for Conventional Energy which shows the kind of Backing the Sector enjoys from Governments Worldwide. The most beautiful part of the Alternate Energy is it is FREE.

The Fund is exposed to Currency Risk.
Moreover, the investors in this Fund will not get the benefit of Zero Long Term Capital Gains Tax.

The Fund offers desirable diversification because the Fund gives Indian investors global access to the high growth renewable energy sector. The Fund has the entire World to choose from and not restricted to Indian companies who are disabled due to strict Govt interventations.
DSP BlackRock World Energy Fund will be a good Portfolio hedge against Rising Oil Prices and should form a definite part of any portfolio. The Fund will also give you both Sector Diversification as well as Geographical Diversification.
Do understand before investing that this Fund depends on Energy Sector and will thus be highly volatile.
The Fund does not offer SIP as of now. When it opens for continuous offer, it does offer SIP, conservative investors should invest preferably through SIP then.
High Risk appetite investors and those who have good knowledge of the Energy Sector should definitely Look at adding this Fund to their Portfolio.

Best of luck,

Srikanth shankar Matrubai

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