DSP Investment Managers has announced the launch of a new fund offer (NFO) for DSP Nifty Midcap 150 Quality 50 Index Fund on July 18. The issue will remain open till July 22.
This new quality-focused mid cap fund offers investors an option to invest in mid-cap companies with the potential of higher growth and profitability, lower leverage & relatively stable earnings, according to the fund house.
Before we proceed, let us first deconstruct the concept of a new fund offer and index funds.
New Fund Offer
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.
Index Funds
Index funds, also known as index-tracked mutual funds, are funds that track a benchmark index. The fund manager just follows the index and makes an attempt to maintain the portfolio constantly in line with the index rather than actively choosing the industries and stocks that will make up the fund's portfolio. Top index funds are regarded as the best option for investors since they offer their investors exceptional market exposure for risk and return.
Fund Overview
The scheme will replicate the Nifty Midcap 150 Quality 50 Index which comprises 50 companies from the parent Nifty Midcap 150 Index based on ‘Quality Scores’ using metrics like return on equity, financial leverage (except for financial services companies) & earning per share or EPS growth variability of each stock.
“Quality should not be expected purely by chance- it requires meticulous, intelligent effort. This is especially important for those looking to invest in midcap stocks. The midcap space is notorious for having many stocks that have the potential that never gets realized- our data suggests that more than 4 out 5 mid-sized companies in India never grow to become market leaders, or blue chips- which is when high returns can get unlocked," says Anil Ghelani, CFA, Head – Passive Investments & Products, DSP Investment Managers.
As per the fund house, the scheme offers investors a simple way to own the potential leaders of tomorrow, with a chance to earn big returns by utilizing this high-risk, high-return strategy.
The fund presentation highlights that the Nifty Midcap 150 Quality 50 TRI (total return index) has outperformed its parent index, the Nifty Midcap 150 TRI since its inception, that is, it has returned 18.8% compared with 15.8% by the parent index (April 2005 to June 2022). Since 2005, the Nifty Midcap 150 Quality 50 TRI has outperformed the parent index in 11 out 17 calendar years.
Fund Features
- Owning potential leaders of tomorrow offers you the chance to 'earn big' returns by utilizing this high-risk, high-return strategy.
- Easy way to invest in quality mid-cap companies with potential of higher profitability, lower leverage & more stable earnings.
- Invest in each stock exactly as per the Nifty Midcap 150 Quality 50 Index, without any bias- No fund manager 'thinking' or emotions involved.
- Comparatively lower expense ratio than active large-cap funds can give you the chance to earn more
Key things to know
- This is a high-risk strategy more suitable for experienced investors or those who have access to expert advice.
- Consider only if you have a well-set core portfolio & are looking to expose no more than 10-15% of your portfolio towards strategic but high-risk opportunities.
- Nifty Midcap 150 Quality 50 Index has underperformed in the last 1 year.
- Historically, short-term underperformance by Quality is followed by future outperformance. Higher the underperformance, higher the future outperformance.
- Consider investing only if you recognize that to maximize the chance of earning good outcomes, you will need to remain invested for a long period of time.
- Ten nifty 50 index funds that demonstrated best performance in past three years
Ten nifty 50 index funds that demonstrated best performance in past three years
| Name of the schemes | 3 year trailing returns (% |
| DSP Nifty 50 Equal Weight Index Fund-Reg(IDCW) | 14.91 |
| DSP Nifty 50 Equal Weight Index Fund-Reg(G) | 14.91 |
| IDFC Nifty 50 Index Fund-Reg(G) | 12.92 |
| UTI Nifty 50 Index Fund-Reg(G) | 12.91 |
| UTI Nifty 50 Index Fund-Reg(IDCW) | 12.91 |
| Taurus Nifty 50 Index Fund-Reg(IDCW) | 12.8 |
| Taurus Nifty 50 Index Fund-Reg(G) | 12.79 |
| ICICI Pru Nifty 50 Index Fund(G) | 12.65 |
| HDFC Index Fund-NIFTY 50 Plan(G) | 12.64 |
| DSP NIFTY 50 Index Fund-Reg(G) | 12.56 |
(Source - FundsIndia, July 19, 2022)
Nifty Midcap 150 index has generated 17.5% CAGR on SIP since inception while delivering 100% outperformance, over any 5 or 10 year period, over the Nifty Midcap 150 Index. On average, the index has generated 18.9% CAGR over any 10 year period.
