Edelweiss Asset Management Limited on Tuesday rolled out a new fund offer (NFO) called ‘Edelweiss Focused Equity Fund’.
Edelweiss Mutual Fund, which has assets under management of about ₹81,126 crore as of end March 31, 2022 has launched an equity fund after three years. The last time this fund house launched an equity fund was in February 2019, a small cap equity fund.
Before we proceed, let us first deconstruct the concept of a new fund offer and equity funds.
What is NFO? Just like an IPO for mutual fund
A new fund offer (NFO) is the process through which an asset management company (AMC) creates a new fund on a first-subscription basis to facilitate the purchase of securities.
The fund house collects funds from the general public through an NFO in order to buy securities such as equity shares, bonds, and other financial instruments on the market. As a newcomer to the market, NFO is less expensive than the current funds.
The mutual fund company that is introducing a new plan must make sure that at least 20 investors contributed to the money raised during the NFO.
Additionally, to prevent the investment amount from being concentrated among a small number of investors, no one individual may own more than 25% of the scheme's corpus. Every NFO is required to abide by this guideline, which is also known as the 20-25 rule in the mutual fund industry.
Why should you choose equity funds over others?
Equity mutual funds invest in the stocks of businesses with a range of market capitalizations in an effort to generate significant returns. They have the potential to offer larger returns than debt and hybrid funds since they are the riskiest category of mutual funds.
An equity mutual fund scheme must invest at least 65 percent of the scheme's assets in stocks and equity-related securities in accordance with the recent SEBI mutual fund regulations.
These funds, on average, outperform all other types of mutual funds in terms of returns. They have historically produced returns that range from 10% to 12%. However, the returns differ according to the market activity and prevailing economic circumstances.
In many respects, equity funds are the best types of investment vehicles for those who aren't as experienced in financial investing or don't have a huge amount of money to invest.
Edelweiss Focused Equity Fund is a focused equity scheme that aims to curate a portfolio of 25-30 stocks with strong business models. The scheme is both market-cap as well as sector agnostic, thereby enabling investors to capitalise upon a wider spectrum of opportunities.
The focused fund will be based on three themes —
- Brands (buy established and emerging brands across B2B and B2C segments)
- Market share gainers (buy market share leaders and emerging market share gainers)
- Innovators (buy innovators, adaptors and enablers of change in business dynamics)
The benchmark for the fund will be NIFTY500 Total Return Index (TRI). The Edelweiss Focused Equity Fund will open for subscription from July 12 to July 25 and offer both direct and regular plans.
The fund will be managed by Trideep Bhattacharya, chief investment officer-equities, and Abhishek Gupta, fund manager, Edelweiss AMC.
- Being a benchmark agnostic portfolio, the strategy may underperform the benchmark in the short term.
- Focused funds may suffer from concentration induced volatility.
- The fund may be more volatile than broad based indices or diversified funds.
- Strategy may underperform during prolonged economic slow down.
The fund aims to invest in both established as well as emerging brands, companies that either have significant market share or the potential to increase market share, and innovators and disruptors.
Radhika Gupta, managing director and chief executive officer, Edelweiss AMC, said, “India is set for one of the best periods of business growth and transformation driven by several factors including compelling demographics, enabling regulation, strong manufacturing push, and accelerated digitisation.”
We believe that some key opportunities that are likely to dominate future growth will be tethered to investment opportunities like brands, market share gainers, and innovators and disruptors. To optimally capitalise upon these, we are launching the Edelweiss Focused Equity fund that will take concentrated exposure to companies within these three investing opportunities, she added.