NFONEST

May 2019

An NFO is usually launched by a fund house to complete its product basket, or if there is a demand for a particular investment theme. AMCs tend to launch newer funds and come out with ideas when that theme is hot property in the market. Often, the funds are launched when the underlying theme is at its peak. If you invest at such a time, it may leave you with a sour taste. Try to ascertain the investment rationale for the theme and if it can hold sway over time. When investing in sectoral or thematic funds, investors must be mindful of the timing. NFOs of mid- and small-cap funds may yield varying results depending on the entry point.  During the NFO phase, the investor only has a rough idea about the maximum charges that will be levied by the scheme. The actual total expense ratio is disclosed only later. Newer funds initially charge a higher expense ratio as their corpus is very small. As its asset base expands, the costs start coming down. Investors should be mindful of the higher cost burden. It is advisable to go with existing schemes that come with an established track record than for a totally new offering. Investors should invest in an NFO only if it has something different to offer, which cannot be achieved through an existing fund. Consider the NFO only if it addresses a specific gap in your portfolio. Otherwise investors should wait for the fund to prove its credentials. Avoid setting up a SIP during a fund’s NFO phase. Once you are convinced of the fund’s execution capabilities, you can initiate a long-term SIP in it. The NAV of the fund at the time of investment has no bearing on the return you can expect. Low NAV during NFO does not mean it is cheaper. A quality fund is equally worth the bet whether its NAV is at Rs 10 or Rs 1,000.

The lone NFO from DSP Mutual Fund adorns the May 2019 NFONEST.

DSP Quant Fund

Opens: May 20, 2019

Closes: June 3, 2019

DSP Mutual Fund has launched the DSP Quant Fund. The name ‘quant fund’ indicates that the use of quantitative factors will decide the course of the investment. The DSP Quant Fund is an open-ended equity scheme that will systematically follow investment rules tested over market cycles with minimum human biases. A quant model with minimum human bias will drive the fund's stock selection and allocation. For portfolio creation, the fund will follow a three-step process – elimination, selection and assigning weights. The scheme’s investment universe will consist of stocks in the BSE 200 index. The elimination process will screen out companies that have very high debt, excessive price volatility and inefficient capital allocation. The remaining companies will be ranked based on multiple factors that gauge quality, growth and value. Consequently, about 50 companies will be shortlisted. These companies will be assigned appropriate quantitative weights.  The scheme’s portfolio will be rebalanced bi-annually. The DSP Quant Fund is a mix of converting good investment principles, of having good companies at good prices held for long periods of time, into rules and then following these rules consistently without our personal biases. These rules have been tested for their effectiveness in generating better-than-benchmark returns. The fund is benchmarked against the S&P BSE 200 TRI Index. Mr. Anil Ghelani will manage the fund.

Aditya Birla Sunlife Mutual Fund Pharma and Healthcare Fund, Aditya Birla Sunlife Mutual Fund Banking ETF, LIC Mutual Fund Overnight Fund, Axis Nifty 100 Equity Fund, Aditya Birla Sunlife PSU Equity Fund, Sundaram Equity Fund, Motilal Oswal Nifty Bank Fund, Motilal Oswal Nifty 500 Fund, ICICI Prudential Bank ETF, Motilal Oswal Nifty Midcap 150 Fund and Motilal Oswal Nifty Smallcap 250 Fund are expected to be launched in the coming months.