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Morgan Stanley Growth Fund

Dhirendra Kumar

Morgan Stanley Growth Fund (MSGF), a 15 year term closed-end equity fund was launched in February 1994. Liquidity is available only through listing at major stock exchanges. Fund is currently available at a 17% discount to its NAV. MSGF units have been put on the compulsory dematerialised list from November 29, 1999.

MSGF has since inception in January '94, posted an annualised return of 8.65% while the Sensex returned 1.34%. Fund as on March 2000, comprises of large cap stocks of blue chip companies with top 25 stocks spread across Software (36%), Media (13%), Auto (12%), FMCG (7%) and a decent exposure to Finance, Engineering, Telecom and Pharma. The fund is however, heavily overweight on Infosys (27%) and Zee Telefilms (12.65%). The top holdings also have two unlisted stocks of Global Electronic Commerce Services (Indian Telecom) and Strides Arcolabs (Foreign Pharma). Improved performance over time has also reduced the discount of the traded price to 17% of the NAV. In the recent downturn in the markets, fund lost 32%.

MSGF looks poised for being an above average performer. And the prevailing discount on the fund offers an excellent opportunity for long-term investors. The 17% discount will at the current NAV levels of Rs 14.46 translate into an yield of 20.5%. Today, MSGF holds quality stocks that can yield reasonable returns in the long run though, the high exposure to ICE sector will make the fund volatile.

Launched in 1994 in a rising market and unprecedented hype raising unmanageable expectation the fund raised Rs 980 crore against a target of Rs. 300 crore. However, the fund tumbled with the market. So the fund which commanded a significant premium even before listing immediately disappeared. The large asset base extensively diversified over 340 scrips from the cyclical sector became a performance deterrent. The fund, riding the rally of 1994, initially performed well but went below par in the long bear phase that followed.

The restructuring initiated in 1997 reduced the no. of scrips to 227 in March '97 and 107 in March '99. Correspondingly concentration in the top holdings were increased to 65% and 81% respectively. Fund had an increased focus towards quality stocks of the growth sectors of Software, Pharma and FMCG. Besides, since 1997, fund started buying back its units, which were trading at a substantial discount to the NAV. The buyback also helped the fund shore up its NAV. Since inception, the fund has bought back over 26 crore units, reducing the unit capital of the fund to Rs 714 crore down 27% as against Rs 981 crore at inception. Fund breached its par value in January '99 and returned 138% during calendar 1999.

Fund Basics
Objective	Size (Rs cr)	Disc(%)	Price: 29/05/00	NAV: 26/05/00	Total Returns (%)
Growth	1371.6	17.00	12.00	14.46	8.65%
Benchmark Comparisons (%)					12/5/2000
	1M	3M	6M	1Yr	3Yr
Fund	-20.1	-33.9	-9.9	30.9	21.5
Sensex	-24.3	-30.8	-11.3	5.9	3.2
Nat. Index	-30.3	-39.5	-4.3	23.3	8.7
Obj. Avg.	-17.2	-24.9	0.1	32.9	8.4
Top Holdings (28/4/2000)					Rank
Infosys Technologies					1
Zee Telefilms					2
Hero Honda Motors					3
HDFC					4
TELCO					5
Tata Tea					6
Container Corpn.					7
Global Electronic Commerce Services					8
SSI					9
Cipla					10
BHEL					11
Dabur					12
VSNL					13
Cummins India					14
Sundram Fasteners					15
Hughes Software					16
Subex Infosystem Ltd.					17

Source: Value Research

Mutual Funds

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