Axis Value Fund - Review of NFO

Axis Mutual Fund Launches Value Fund NFO [Review]

Axis Value Fund - Review of NFOAxis MF Launches Value Fund NFO – Review

Axis Mutual Funds has launched Value Fund NFO that has opened for subscription on 2nd September 2021. Axis 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 the long term. Should you invest in Axis Value Fund New Fund Offer (NFO)? What are the various risk factors associated with such value funds?

Also Read: Mirae Asset S&P 500 Top 50 Fund – Underlying fund delivered 7.8x returns in last 10 years – Should you invest?

Axis Value Fund NFO – Issue Details

Axis Value Fund opened for subscription on Thursday, 2nd September 2021 and closes on Thursday, 16th September 2021.  Here are the NFO details.

Scheme Opens 02-Sep-21
Scheme Closes 16-Sep-21
Scheme reopens for continuous purchase/sale Within 5 days from closure date
Minimum Lumpsum Rs 5,000
Minimum SIP Rs 1,000 for 6 months
NAV of the fund Rs 10 during NFO period
Entry Load Nil
Exit Load Within 1 year – beyond 10% of investments – 1% exit load
After 1 year – Nil
Risk Moderate high risk
Benchmark S&P BSE 200 TRI

Axis Value Fund SID (Draft)

What is the investment objective of this MF scheme?

To generate consistent long-term capital appreciation by investing predominantly in equity and equity related securities 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 and Equity related instruments 80% 100% High
Debt and Money Market Securities 0% 20% Low to Medium
Units issued by REITs and InvITs 0% 10% Medium to High

Why to invest in Axis Value Fund NFO?

Here are a few reasons to invest in such mutual fund schemes.

1) This new fund scheme 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. Mutual 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) This fund may invest up to 30% in foreign securities. There is currency risk and geo-political risks of investing in foreign securities.

6) It also invests in REITs and InvITs which are high risk.

7) You can refer scheme related risk factors in SID / KIM.

Past Performance of Value Funds

Here is the snapshot of performance of the existing value funds. Returns are annualised.

Scheme Name  3 Yrs 5 Yrs 10 Yrs
L&T India Value Fund 12.9% 14.3% 18.7%
ICICI Prudential Value Discovery Fund 14.1% 12.8% 17.9%
Invesco India Contra Fund 13.8% 16.6% 17.3%
IDFC Sterling Value Fund 13.2% 15.7% 16.4%
Aditya Birla Sun Life Pure Value Fund 6.3% 8.7% 16.0%
Tata Equity PE Fund 9.3% 12.8% 16.0%
Kotak India EQ Contra Fund 14.3% 16.1% 15.7%
Nippon India Value Fund 15.4% 14.8% 15.7%
JM Value Fund 13.4% 14.0% 15.7%
HDFC Capital Builder Value Fund 10.2% 13.1% 15.1%
UTI Value Opportunities Fund 15.0% 14.3% 14.0%
SBI Contra Fund 16.6% 13.7% 14.0%
Quantum Long Term Equity Value Fund 10.8% 10.4% 13.8%
Templeton India Value Fund 10.6% 12.2% 13.5%

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Axis Value Fund NFO – Should you invest?

Axis 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.

Let me take an example of ABSL Value Fund. This fund has outstanding performance and in top-5 in the last 10 years. However, it is the lowest in the last 3 years. Can you continue to invest for few more years?

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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Suresh KP

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