DSP Blackrock World Mining Fund - An Attractive Investment Opportunity

In this post I would be talking about the DSP Blackrock World Mining Fund, which in my opinion is a good investment option for Indian investors looking to get exposure to global mining companies. This is just my opinion on the fund and is not an advertisement of the Fund whose NFO period is currently open.

What is the DSP BlackRock world mining fund?

DSP BlackRock World Mining Fund is a fund of funds scheme which predominantly invests into the BlackRock Global Funds (BGF) - World Mining Fund.

What are Fund of Funds?

Fund of funds are mutual funds that invest in other mutual funds. Thus DSP Blackrock World Mining Fund would be investing in other mutual funds related to the global mining theme.

What is the NFO period for the Fund?

The scheme is an open ended fund of funds scheme which is open from November 23, 2009. The NFO closes on December 18, 2009.

Which Fund will DSP Blackrock World Mining Fund Invest in?

As mentioned earlier, fund of funds is one which invest in other mutual funds. The DSP BlackRock World Mining fund provides access to BGF – World Mining Fund, one of the largest funds in its category in the world, with a long term performance track record. The BGF World Mining Fund has been in existence for a
period of more than 12 years. The fund was launched on 24 April, 1997. Given below  is a snapshot of the historical performance of the fund.

Performance as at October 30, 2009 of BGF World Mining Fund, compared with HSBC Global Mining Index (in INR terms).

Source: DSP BlackRock

Clearly, the fund has outperformed the broader mining index since its inception. Since the new fund will primarily invest in this fund, one expect robust performance of the new fund as well.

Sectoral Allocation of the BGF World Mining Fund

The table gives the sectoral allocation of the BGF World Mining Fund as of 30th October 2009.

Source: DSP BlackRock

Why Invest in Commodities?

• A weak Dollar is Commodity price supportive. The long term trend for the Dollar is downwards. This will ensure that commodity prices remain firm as a weak Dollar is also a symptom of inflation.
  

• The Demand- Supply scenario for commodities is highly favorable for upside in commodity prices. The commodities had a bear market from 1980-2000. During this phase, there was minimal capital expenditure on mining activities. This has lead to suppply shortages for commodities. As an example - The world would need to mine more copper in the next 25 years then it has done throughout history in order to meet the demand.
  

• The energing countries are house to 80% of the global population. As the living standards in emerging countries rise, there will be huge demand for industrial commodities. This is commodity price supportive.
  

• The geo political tensions in the world are also on a rise. Commodities have moved up sharply during times of war in the past. Thus, investors should have some exposure to key commodities and precious metals in times of global tensions.
  

Advantage for Indian Investors

• Through this fund, Indian investors would get exposure to global mining Companies. Thus, investors betting on Commodities can consider exposure to this fund. Moreover, the BGF World Mining Fund primarily invests in Companies with a market capitalization of over $10 billion. The risk associated with large mining Companies is relatively less and they have easier access to funding which is one of the key requirements for the business with long gestation period.

DSP BlackRock Website Link for Further Details

DSP BlackRock


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