ICICI Pru Pharma Healthcare and Diagnostics (PHD) Fund – Should you invest?
After Mirae Emerging Mutual Fund has launched its new Healthcare fund, other Mutual Fund AMCs are in queue to tap the opportunities in the Healthcare Sector. Pharma and Healthcare is one of my favorite sector in the last decade. However, Pharma/Healthcare has been under performer in the last couple of years. In this uncertainty, ICICI Prudential Pharma Healthcare and Diagnostics (PHD) Fund (NFO) would open for subscription on 25th June, 2018. This new mutual fund scheme would tap the opportunities in Pharma, Healthcare, Diagnostics and Wellness Sector. There are already few mutual fund schemes in Pharma and Healthcare, hence need to see how this new fund would catch attention of investors. Should you invest in the ICICI Prudential PHD Fund? What are the risk factors an investor need to consider before investing in this ICICI Prudential Pharma Healthcare and Diagnostics (PHD) New Fund Offer (NFO)?
Features of ICICI Prudential PHD Fund
This is open ended mutual fund scheme which invests in equity and related instruments of Pharma, healthcare and diagnostic area.
This scheme would open for subscription on 25th June, 2018.
This scheme closed for subscription on 9th July, 2018.
It would reopen for further subscription from 17th July, 2018.
This scheme is available in both regular and direct plans.
Like any other MF scheme, each such plan offers both dividend and growth options. Under the dividend option regular dividends would be paid.
This scheme is available for lump sum and SIP options.
Minimum investment is Rs 5,000 and in multiples of Rs 1,000 there-off for lump sum investments.
Minimum SIP investment is Rs 1,000 per month and minimum SIP tenure is 5 months.
Minimum Systematic Withdrawal Plan (SWP) is Rs 500.
There is no maximum amount of investment.
The NAV of the NFO is Rs 10 per unit now during initial subscription.
There is an exit load of 1% if you withdraw the units within 540 days.
This scheme is classified as high risk scheme.
This scheme benchmark is a S&P BSE Healthcare Index (TRI).
Scheme expense ratio is estimated up to 2.5% of the total assets on any day.
Who is the Fund Manager for ICICI Prudential PHD Fund NFO?
The Fund Managers are Mr. Ihab Dalwai and Priyanka Khandelwal. Here is the current portfolio of the schemes what they are handling.
What is the investment objective and strategy of this ICICI Prudential PHD Fund?
The objective of this scheme is to generate long-term capital appreciation by creating a portfolio that is invested in Equity and Equity related securities of pharma, healthcare, hospitals, diagnostics, wellness and allied companies. However, there can be no assurance or guarantee that the investment objective of the scheme would be achieved.
What is the allocation pattern in this mutual fund scheme?
This fund investment pattern looks as follows:
1) It invests 80% to 100% in Equity and Equity related instruments of pharma, healthcare, diagnostics, wellness and allied companies. This risk profile in this segment is high.
2) It invests 0% to 20% in Equity and Equity related instruments of other than pharma, healthcare, diagnostics, wellness and allied companies. This risk profile in this segment is Medium to high.
3) It invests 0% to 20% in Debt, Units of Mutual Fund schemes, Money market instruments, Cash and Cash Equivalent. This risk profile in this segment is low to medium.
How does Pharma, Healthcare, Diagnostics and Welleness segment doing in India?
Pharma Segment: The Indian pharmaceuticals market is the 3rd largest in terms of volume and 13th largest in terms of value. Branded generics dominate the pharmaceuticals market, constituting nearly 70 to 80 per cent of the market. India is the largest provider of generic drugs globally with the Indian generics accounting for 20 per cent of global exports in terms of volume. Of late, consolidation has become an important characteristic of the Indian pharmaceutical market as the industry is highly fragmented.
Healthcare Segment: Healthcare has become one of India‘s largest sectors – both in terms of revenue and employment. Healthcare comprises hospitals, medical devices, clinical trials, outsourcing, tele medicine, medical tourism, health insurance and medical equipment. The Indian healthcare sector is growing at a brisk pace due to its strengthening coverage, services and increasing expenditure by public as well private players.
Diagnostics Segment: Heightened physician awareness to better clinical outcomes and increasing patient requirement to avail of high quality care have made it imperative for providers to deliver targeted therapy. This has been made possible by the availability of sensitive and specific diagnostic tests along with technologically advanced medical devices and equipments. These further enable healthcare providers to utilize material and human resources optimally.
Wellness Segment: In India, wellness is a concept which has been in vogue since ancient times. Traditional medical and health practices like Ayurveda and yoga have propounded the concept of mental and bodily wellness. Most of the ancient wellness concepts have largely focused on the basic needs of an individual within the need hierarchy, namely a focus on health, nutrition and relaxation. With the progress of time, wellness as a concept has taken up a multi-dimensional definition, encompassing the individual‘s desire for social acceptance, exclusivity and collective welfare.
Can NRI invest in this MF scheme?
Yes, they can invest in this scheme.
Also Read: Best Long Term Equity Mutual Funds to invest
What are the risks involved in the banking sector fund?
One should consider some of these risk factors before investing.
1) This mutual fund scheme is a sector specific mutual fund scheme. Generally sector funds are high risk as they invest only in one particular sector.
2) This scheme invests in Pharma, healthcare, Hospitals, Diagnostics and Wellness and Allied companies. This limits its exposure to other sectors, hence making this fund as high risk.
3) Pharma and Healthcare sectors are under performers in the last couple of years. If you observe, some of these mutual funds gave negative returns in the last 2-3 years.
4) This fund invests up to 20% in debt instruments. Certain corporate debt instruments carry credit risk and there could be a downfall in such instrument ratings and values.
5) This fund invests some of its portion in derivatives, which are generally high risk. Investors should bear this risk in mind before investing in such funds.
How is the Performance of Existing Pharma and Healthcare Mutual Funds?
Currently there are existing pharma and healthcare mutual funds, hence let us review how they are performing.
1) Reliance Pharma Fund: This is one of my favorite fund. This fund gave 8% returns in the last 1 year, 2% annualized returns in the last 3 years and 14% returns in the last 5 years. If you would have invested Rs 1,000 per month through SIP for 5 years, your invested value would have been Rs 60,000 and your investment would have grown to Rs 70,000 now. If you would have invested Rs 1 Lakh 5 years back, your investment would have now grown to Rs 1.9 Lakhs. The majority under performance in the last 1-3 years are due to the entire pharma sector being in a down trend.
2) SBI Healthcare Opportunities Fund (erstwhile SBI Pharma Fund): This fund gave -10% (negative) returns in the last 1 year, -5% (negative) annualized returns in the last 3 years and 11% returns in the last 5 years. If you would have invested Rs 1,000 per month through SIP for 5 years, your invested value would have been Rs 60,000 and your investment would have grown to Rs 61,000 now. If you would have invested Rs 1 Lakh 5 years back, your investment would have now grown to Rs 1.6 Lakhs. The majority under performance in the last 1-3 years are due to the entire pharma sector being in a down trend.
3) UTI Healthcare Fund (erstwhile UTI Pharma and Healthcare Fund): This fund gave -2% (negative) returns in the last 1 year, -3% (negative) annualized returns in the last 3 years and 10% returns in the last 5 years. If you would have invested Rs 1,000 per month through SIP for 5 years, your invested value would have been Rs 60,000 and your investment would have grown to Rs 61,000 now. If you would have invested Rs 1 Lakh 5 years back, your investment would have now grown to Rs 1.5 Lakhs. Even here, the major under performance in the last 1-3 years are due to the entire pharma sector being in a down trend.
Should you invest in the ICICI Prudential PHD Fund?
Pharma and Healthcare segment has been an evergreen sector over a decade where they have been posting double digit growth. However, due to stiff competition from US Drug makers, Indian drug exports have declined by 5% YoY last year. We have been seeing this in the last couple of years in terms of performance of pharma stocks. This could cause some pressure to pharma stocks in future too. This mutual fund scheme invests in health care and diagnostic segments, which includes hospitals, diagnostics, wellness companies etc. where they is high growth potential. If you wish to take good investment opportunities for pharma and healthcare sector and willing to take high risk, investors can invest in this new mutual fund scheme for medium to long term of 4-8 years.
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ICICI Prudential Pharma Healthcare and Diagnostics (PHD) Fund (NFO) – Should you invest