Goldman Sachs plans to launch an equity diversified scheme which offers nothing different from the 216 similar schemes which are currently available in the market

Goldman Sachs Mutual Fund which took over Benchmark Mutual Fund last year plans to launch an equity diversified scheme—Goldman Sachs India Equity Fund according to the offer document filed with the Securities and Exchange Board of India (SEBI). This would be the first diversified equity scheme launched by the mutual fund company. The new fund would join the list of three other equity-oriented schemes managed by the company which include Goldman Sachs Derivative Fund, Goldman Sachs Equity & Derivative Opportunities Fund and an index fund— Goldman Sachs S&P 500. These funds were part of Benchmark Mutual Fund. The India Equity fund will invest greater than 80% of its assets in equity and equity related securities and the remaining in debt securities and money market instruments. The performance of the scheme would be benchmarked against the S&P 500 index.

The new scheme will add on to the list of 200 plus equity diversified schemes already available in the market and this is excluding index funds and sector funds. The holdings of many equity diversified funds are remarkably similar. Moneylife did an analysis of equity diversified funds that have declared their holding in December 2011. 207 funds that declared their holding invested in a total of just 637 stocks. 43 of these stocks are repeated in 50 or more schemes. Reduce the number of stocks and you will find that 10 stocks are present in more than 100 schemes. ICICI Bank is present in around 145 schemes and Reliance Industries is present in around 139 schemes. Around 46 schemes invest in a same set of 10 stocks and around 175 schemes pick from a set of just 20 stocks.

However, even with selection of the same stocks, what separates the best from the rest is proper market timing and asset allocation, which only a few fund managers possess. We all know that investing in equities is risky, but investing in the wrong fund can be even worse. Therefore it is essential to analyse the portfolio of the equity fund before investing and not to forget the long-term past performance of the fund.

As for Goldman Sachs, there is no long-term history of fund management company in India, managing money for retail investors. This fund comes under the new management of Benchmark altogether. The only other equity oriented funds that are managed by the company include two arbitrage funds and one index fund, all of which were launched by Benchmark Mutual Fund. All the three funds have underperformed the benchmark in the last one-year, two-year and three-year period ending 10 February 2012. Prashant Khemka, chief investment officer (active equity), would be the new fund manager and this would be the first scheme managed by him. He comes in with 14 years of experience.

Though Goldman Sachs is a big name in global investment banking, securities and investment management worldwide, one should be wary before investing. As in a recent study conducted by Moneylife showed that many big names in the industry owned funds that turned out to be the worst performers (Read: Equity Mutual Funds to avoid at all costs).

We would suggest invest in funds with a proven track record through a systematic investing plan. Investing in this fund can wait.