Mutual Fund Selected:

Kotak Infrastructure & Economic Reform (Development) Fund.

History:

This fund was first allotted on 25th February 2008. This fund was established to utilize the high CAGR
in the Infrastructure and Development industry.

Reason for selecting this fund:

I see a bright future for the infrastructure and economic development industry due to the following factors-

Factor 1: 
Government spending with union budget continues to take on capital expenditure, programs such
as Har Ghar Nal, affordable housing, gas distributions, clean energy, transportation and logistics are
the govt program's foundation, aligning with these businesses is expected to be profitable.

Factor 2:
Private sector spending has been weak for the 10 years. In India, the corporate sector has also seen
massive deleveraging. Now India Inc. has one of the best balance sheets, as demand normalizes, we
may see steps towards Capital Expenditure. The government has focused on supporting new Capital
Expenditure and on reducing interest rates.

Factor 3: 
Affordable Housing – Affordable housing has increased quite significantly. Covid19 has brought two
major changes – one is the Work from Home theme, which means most households are looking for a
more prominent place, and other, home improvement has shown strong pickup. Families also need
income guarantee, and when economic activity comes to normal, we firmly believe that people may
choose to buy bigger homes.

Allotment Date:

25th February 2008

What is expected from the scheme?

1. Long-term capital growth

2. Long-term capital appreciation by investing in equity and equity related instruments of companies
contributing to infrastructure & economic development of India

AMC:
Kotak Mutual Fund

AUM:

417.16 Cr

Benchmark:

India Infrastructure Index

Fund Manager:

Mr. Harish Krishnan is a Bachelor of Technology in Electronics & Communications from the
Government Engineering College, Trichur, and is an alumnus of Indian Institute of Management,
Kozhikode, and is a Chartered Financial Analyst from the CFA Institute. He has 13 years of experience
spread over Fund Management and Equity Research. Before joining Kotak Mutual Fund, he managed
Kotak's offshore funds in Singapore and Dubai. He has also worked at Infosys Technologies Ltd.
Investment Objective:

The investment objective of the Kotak Tax Saver Scheme is to create long-term capital appreciation
from a portfolio that is diversified and comprises predominantly equity and equity-related securities
of companies involved in the economic development of India as a result of potential investments in
infrastructure and unfolding economic reforms. But there is no assurance that the objective will be
realized.

Investment Strategy:

India's rapid development in the economic sector and urbanization has led to an ever-increasing need
to provide the basic infrastructure, including power, telecom, water, sanitization, housing, roads and
urban transport, solid waste management, etc. The current urban roads are inadequate given the
growing traffic needs. The road length has increased by only 5% while the number of vehicles has
increased 80-fold over the last 40 years, which is an alarming situation. The countries economic
development depends significantly on the efficiency of the roadway and urban transit networks.
There are chronic power shortages in India due to underdeveloped generation capacity and inefficient
transmission and distribution networks. The subscriber population is still low in India compared to the
developed countries.

According to Mr. M Rajamani, who is the Joint Secretary to the government of India, the Ministry of
Urban Development said, to ensure a balanced growth for all sections of the population on a
sustained basis, India has started to work upon an ambitious economic reform program aimed at
correcting the imbalances. The economic reform has increased the requirements of various goods and
essential services important for sustainable development.

We require to expand our financial resources to expand these basic amenities. The resource gap is
significant and cannot be met by traditional central and state government grants and loans. Thus the
private sector can and should play a more substantial role in financing infrastructure by partnering
with the public sector.

This growing area will provide vast opportunities for investors. Kotak Infrastructure & Economic
Reform Fund will primarily invest in equity and related instruments through primary and secondary
purchases of companies involved in the development due to potential investments in infrastructure.
Depending on the fund managers' views and under normal market conditions, the assets of the
Scheme will be invested across various stocks that represent a broad range of sectors of the economy
to ensure diversification of risks and are as mentioned below.

(i) Infrastructure: Companies operating in but not limited to power, telecom, water, oil and gas,
housing, construction, ports, airports, shipping & shipbuilding, roads, logistics, real estate, etc., and
sectors like cement, metals, capital goods, and banking and financial services that will benefit from
the development in infrastructure.

(ii) Economic reform-oriented: Companies in the sector that will potentially benefit from the ongoing
liberalization in the Indian economy, including FDI in banking and financial services, relaxation in
foreign exchange controls, and any other sector that is moving towards a market that is a freer and
based model like retail, media and entertainment, mining, etc.

The fund manager may use selective derivative strategies with a view to optimize the overall
performance of the Scheme. As per the extant SEBI (Mutual Funds) Regulations, 1996, the Scheme
may invest in unlisted/ listed equity shares and invest in companies coming which and IPO and whose
post-issue market cap falls under the mentioned criteria of SEBI. The Scheme may invest in another
scheme of the Kotak Mahindra Mutual Fund or any other Mutual Fund without charging any fees,
 provided that aggregate inter-scheme investment made by all schemes under the management of
Kotak Mahindra Asset Management Company Limited or in schemes under the management of any
other asset management company and shall not exceed 5% of the net asset value of Kotak Mahindra
Mutual Fund.

Asset Allocation:

Overall, as most of the investment is in equity, it is a high risk mutual fund.

Portfolio management:

As the portfolio of the Schemes will be actively managed and to achieve the investment objective, the
Schemes may have a high turnover. The Scheme being an open-ended Scheme, it is expected that
there would be several Subscriptions and Redemptions daily.

The asset allocation pattern may change, subject to SEBI (MF) Regulations, considering market
conditions, applicable regulations, market opportunities, political, economic factors. The intention is
to seek to protect the interests of the Unitholders, and the proportions may vary depending upon the
perception of the Fund Manager.

In case of any deviation from the normal situation, the AMC will achieve a typical asset allocation
pattern in a maximum of 30 days. If not done, the justification for the same shall be made before the
Committee and the reasons. The Investment Committee will decide the further course of action. The
portfolio will adhere to the Scheme's investment objective.

Therefore, the estimation of the likely turnover in the portfolio is complex and difficult.

Portfolio Turnover Ratio:42.56

This is a actively managed portfolio. We can clearly observe in the portfolio of March 2020 and
September 2020, the major equities of investment has changed. For example, Shree cements had the
highest investment but in Portfolio of September 2020, the top position is attained by RIL stock. (Can
be observed in excel File)

 
Risk Mitigation Strategy:

1. Risk control measures for investment strategy.

To control the risk, the fund will comply with all the SEBI limits on exposure. The risk is monitored,
and all necessary actions would be taken on the portfolio when and if required. Attribution analysis is
done to monitor the under/ over performance compared to the benchmark and the reasons for the
same.

2. Risk mitigation measures for portfolio volatility

Portfolio volatility would be maintained and diversified according to the objective of the scheme.
Volatility would be monitored and compared with the peers and benchmark.

3. Risk mitigation measures for managing liquidity

The fund manager may keep a portion of the portfolio in cash and/or debt and money market
instruments to adhere to the specified asset allocation framework.

Stock turnover is monitored at regular intervals, and the debt/money market instruments invested by
the fund will have a short-term duration.

Peer Comparison:

Infrastructure funds are sector funds that invest in companies that are either indirectly or directly
involved in Indian infrastructure development, such as energy, power, metals, estate, etc. Even
though the shares of infrastructure companies crashed during the 2008 financial crisis, from 2014
onwards, they started performing well. Also, the Modi Government’s keen interest in the country's
infrastructure development has caught the eye of many investors in the fund. Several top-performing
infrastructure schemes have given returns exceeding 35% in the last year.

Investors interested in investing in this fund are advised to check the scheme's last five years’
performances along with their AUM (that should be more than 100 Cr).

Also, one should not forget the risk for such funds is high because they are sector-specific funds. Thus,
an investor should have enough knowledge and understanding of the fund before making investment
decisions.

I have collected data of the Thematic (infrastructure) Mutual Funds. Also, tried to compare their
returns over the 3-year period. Our chosen fund rises above average in the same.
 Returns for 3
years
Fund Name NAV AUM Returns Since Inception Past Rolling Risk factor
 1,06
Franklin Build India Fund 59.7 0 16.1 13.04 16.01 Risky
      04 Sep' 09      
Tata Infrastructure Fund 83.27 699 13.5 14.28 7.32 Somewhat Good
      31 Dec' 04      
1,61
ICICI Prudential Infrastructure Fund 73.74 7 13.3 13.56 7.2 Risky
      02 Dec' 05      
1,47
UTI Infrastructure Fund 74.53 4 12.2 11.5 6.02 Somewhat Good
      19 Apr' 04      
Aditya Birla Sun Life Infrastructure Fund 46.98 549 10.5 11.41 8.89 Risky
      17 Mar' 06      
Sundaram Infrastructure Advantage Fund 46.72 610 10.1 12.09 5.49 Risky
      29 Sep' 05      
Taurus Infrastructure Fund 37.35 5 9.52 12.53 9.18 Risky
      05 Mar' 07      
BOI AXA Manufacturing & Infrastructure Fund 26.29 58 8.76 14.46 8.02 Risky
      05 Mar' 10      
Kotak Infrastructure and Economic Reform Fund 29.82 417 8.4 13.53 10.71 Risky
      25 Feb' 08      
IDFC Infrastructure Fund 23.23 659 8.4 12.47 7.94 Risky
      08 Mar' 11      
Invesco India Infrastructure Fund 28.5 207 7.84 18.52 10.34 Risky
      24 Oct' 07      
SBI Infrastructure Fund 23.16 674 6.07 15.52 6.45 Risky
      06 Jul' 07      
HSBC Infrastructure Equity Fund 23.66 109 5.69 5.19 4.08 Risky
      23 Feb' 06      
1,26
L&T Infrastructure Fund 21.33 9 5.56 7.72 9.56 Risky
      27 Sep' 07      
LIC MF Infrastructure Fund 20.25 74 5.37 13.47 5.9 Risky
      24 Mar' 08      
HDFC Infrastructure Fund 19.33 606 5 3.29 4.99 Risky
      10 Mar' 08      
Quant Infrastructure Fund 17.84 49 4.21 26.83 3.56  
      26 Aug' 07