ITI Value Fund NFO – Review
ITI Mutual Funds is planning to launch Value Fund that would open for subscription from 25th May 2020. ITI Value Fund is an open-ended mutual fund scheme that follows value investment strategy. Under this strategy, fund would invest in undervalued stocks which has high potential to multiply your money in long term. Should you invest in ITI Value Fund New Fund Offer (NFO)? What are the various risk factors associated with such funds?
ITI Value Fund NFO – Issue Details
ITI Value Fund would open for subscription on Tuesday, May 25, 2021 and closes on Tuesday, June 8, 2021. Here are the NFO details.
|Scheme reopens for continuous purchase/sale||By June 21, 2021|
|Minimum Lumpsum||Rs 5,000|
|Minimum SIP||Rs 500 for 6 months|
|NAV of the fund||Rs 10 during NFO period|
|Exit Load||1% if redeemed < 12 months|
|Risk||Very High Risk|
|Max expense Ratio (TER)||2.25%|
|Benchmark||Nifty 500 Value 50 TRI|
What is the investment objective of this MF scheme?
The investment objective of the scheme is to seek to generate long term capital appreciation by investing substantially in a portfolio of equity and equity related instruments by following value investing strategy.
There is no assurance or guarantee that the investment objective of the scheme will be realized.
What is the allocation pattern in this mutual fund?
This fund investment pattern is as follows:
|Type of instruments||Min %||Max %||Risk Profile|
|Equity & Equity related instruments
including derivatives Weight Index
|Preference Shares||0%||10%||Medium to High|
|Debt and Money Market instruments||0%||35%||Low to Medium|
|Units issued by REITs and InvITs||0%||10%||Medium to High|
Why to invest in ITI Value Fund NFO?
Here are a few reasons to invest in such mutual fund schemes.
1) This fund invests based on value investing strategy i.e., the scheme would seek to identify undervalued securities having the potential to deliver superior risk adjusted returns over the long term and will follow a value-based approach towards investing. Undervalued stocks would include stocks which the Fund Managers believe are trading at less than their assessed intrinsic values.
2) Investing in value funds can offer better diversification for long term strategy as most of such stocks are growth oriented (not like short term in nature).
3) Excellent protection during down turns. Since such funds invests in undervalued stocks, there could be good protection against stock market crash.
4) This fund invests in value investment strategy. Value investing is considered as one of the most successful investment strategies across the world.
5) Value funds gave stable and consistent returns in the last 7-10 years.
Some key risk factors you should consider before you invest in such funds
Everything does not look rosy for value funds. Here are some negative and risk factors in value funds.
1) There is value trap in the value investing strategy. Fund manager may consider the stocks as undervalued, but other investors might not think so. In such case, the stocks, a fund manager believes good, can further fall.
2) Value funds can be identified in bear market or bull market. In case of bull market, while majority of the stocks keep moving in positive direction, value funds might go in opposite direction or with no significant movement.
3) If the stock is underpriced, there could be several reasons. There could be even corporate governance issues where the company might have potential but may be undervalued due to this.
4) This fund invests in debt instruments where there are interest rate risks, liquidity risks and default risks.
5) It also invests in REITs and InvITs which are high risk.
6) You can refer complete risk factors of investing in this particular scheme in SID / KIM / NFO prospectus.
Past Performance of Value Funds
Here is the quick snapshot on the performance of the existing funds from this category. These are annualised returns.
|Fund Name||3 Years||5 Years||10 Years|
|L&T India Value Fund||9.4%||14.8%||16.1%|
|ICICI Prudential Value Discovery Fund||13.3%||13.5%||15.5%|
|Invesco India Contra Fund||12.1%||16.9%||15.4%|
|Aditya Birla Sun Life Pure Value Fund||2.1%||10.8%||14.7%|
|IDFC Sterling Value Fund||8.5%||15.7%||14.7%|
|Tata Equity PE Fund||6.4%||14.9%||13.6%|
|Kotak India EQ Contra Fund||12.6%||16.4%||13.4%|
|Nippon India Value Fund||11.4%||15.4%||13.1%|
|JM Value Fund||10.8%||16.3%||12.9%|
|HDFC Capital Builder Value Fund||7.5%||13.1%||12.8%|
|UTI Value Opportunities Fund||13.0%||14.1%||12.2%|
|Quantum Long Term Equity Value Fund||9.7%||11.8%||12.0%|
|SBI Contra Fund||13.4%||14.5%||11.7%|
|Templeton India Value Fund||7.6%||12.7%||11.0%|
You may also like: 10 Debt Mutual Funds with High Returns in 2021
ITI Value Fund NFO – Should you invest?
ITI Value Fund invests based on value investment strategy i.e., investing in undervalued stocks. Fund manager might invest in low expensive stocks that are out of favor and price discovery of these stocks takes long time. Many investors would not have patience. We all look for superior performance in short term or at least in the medium term. Such investors need to avoid value funds. Investors who want to lock their money for long term by investing in mutual funds can invest in such value mutual funds now. If you do not want to test with new value funds, you can invest in some of the existing Value funds that have proven its performance.
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