Canara Robeco Asset Management Company has launched Canara Robeco Mid-Cap Fund (CRMF), its second new fund offer (NFO) this year after the launch of Canara Robeco Banking & PSU Debt Fund. Canara Robeco Mid-Cap Fund is an open-ended scheme launched to generate capital appreciation by investing predominantly in equity and equity-related instruments of mid-cap companies. Here's all you need to know about the NFO:
Q. When was this NFO launched?
Answer: The NFO was launched on November 11, 2022. Investors can continue to invest in this NFO till November 25, 2022.
Q. What is this offer about?
Answer: The idea behind launching this fund is to garner capital appreciation by parking money in mid-cap companies. Under this scheme, at least 65 percent of the money is put in mid-cap firms ranked 101-250 by market capitalisation on the Bombay Stock Exchange. A part of the money would also be put into companies that exhibit high earning potential and are expected to do so in the future. Last but not the least, a portion of the portfolio would also include cyclical stocks to enhance cash flows through more return on capital on the inventory or profits during the revival of the cycle.
Not more than four percent would be invested in any single stock. The scheme will be benchmarked against the S&P BSE 150 Mid-Cap Index TRI.
Q. Who will be managing this fund?
Answer: Two well-known fund managers Shridatta Bhandwaldar and Ajay Khandelwal would be looking after the investments in this fund.
Q. Should you invest in this fund?
Answer: Mid-cap funds have undoubtedly performed well in the past. The mid-cap category has generated impressive returns in the past compared to its large-cap and small-cap counterparts. The turnaround in mid-cap companies is easy, and the churning of earnings and profits is quicker, thus, explaining their ability to turn out more profits than large-cap companies.
However, many personal finance experts think one must never rush to invest in an NFO. It is important to wait a while and check if the fund is performing as per expectations and is worth your investment. This is because your financial goals and investment tenure are directly linked to its earnings growth and, hence, the need and urge to stay away from NFO investments.
Preeti Zende, founder and owner, Apana Dhan Financial Services shared, “This AMC's previous mutual funds have shown decent performance so investors can be interested in investing in this NFO for the additional alpha generation. But right now the market is near its previous high. If the global clues support we may see a new high in the near future. Entering into a such high market with a rich valuation where volatility is still not over may not be a good idea. Factors that caused volatility such as geo-political tension, the trend of rising interest rates, and high inflation are still there. So, the market will be volatile in the future as well. We may experience corrections and the midcaps can have an attractive valuation at that time.”
Q. Will exclusive investment in mid-cap funds work?
Answer: Mid-cap companies are capital-intensive and hence more prone to market volatility. The rising interest rates can make a dent in their profits, thus, explaining their low earnings output in the near future. The risk appetite in mid-cap stocks is high. Also, since these funds can invest only in 150 companies in the mid-cap space, investment restrictions take away the benefit of putting money in other profit-making companies. Given the limitations imposed, it would perhaps make more sense to invest in a flexicap fund that occasionally rotates its money between companies of varying market capitalisations.
Investing in mid-cap stocks through this fund alone may have its pros and cons. However, it is not all doom and gloom for long-term investors who slowly accumulate units through regular and persistent systematic investments.