CPSE ETF or a Power Sector Fund

Goldman Sachs Asset Management launched the Exchange-Traded Fund (ETF) of select Central public sector units (CPSE) on 14th Feb 2014.

The CPSE-ETF is an open-ended scheme comprising 10 major PSUs such as ONGC, Gail and Coal India. The new fund offer is for anchor investors (investing above Rs 10 crore) and for non-anchor and retail investors. This new index is another option of Government divesting stake in public sector enterprises.

The CPSE-ETF will have the following stocks with respective weightage:

1. Oil & Natural Gas Corporation –26.72%

2. Gail India –18.48%

3. Coal India –17.75%

4. Rural Electrification Corporation –7.16%

5. Oil India –7.04%

6. Indian Oil Corporation –6.82%

7. Power Finance Corporation –6.49%

8. Container Corporation of India–6.40%

9. Bharat Electronics –2.00%

10. Engineers India –1.13%

Industry wise distribution of funds will be:

1. Energy- 59%

2. Metals–18%

3. Financial Services –14%

4. Services–6%

5. Industrial Manufacturing –2%

6. Construction –1%

With nearly 60% of the fund being invested in India’s Power Sector; CPSE-ETF works more as a power sector focused fund [my belief].

Analyzing returns from some other power focused funds in India:

1. Reliance Diversified Power Sector -G and

2. Escorts Power and Energy Fund- G

Both the above funds have returned negative growth over the last 3 years.

Ofcourse the CPSE-ETF results may differ and the dynamics of India’s power sector may change as well with a stable and efficient government at the centre that is interested to restructure India’s troubled power sector.  Also this being a disinvestment route for the government; there maybe focus on more efficient management of the PSUs.

Not to forget that there is diversification provided through financial companies and metals; others being of little significance.

 

But is it a risk worth taking? A well diversified equity fund may select the top 2-3 PSUs in investment portfolio compared to other companies/themes/investment opportunities and aim for better returns.

 

Sources:  GoldmanSachs and moneycontrol.com

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