Bandhan MF (erstwhile IDFC Mutual Funds) has launched Financial Services Fund NFO. This NFO would open for subscription on 10th July, 2023. This mutual fund scheme would invest majorly in companies that are from the financial services sector. This sector has been ever green sector over the decade. Should you invest in Bandhan Financial Services Fund NFO? What are the various risk factors associated with such funds?
Also Read: 10 Mutual Funds that turned 10K SIP to Rs 52 Lakhs
Bandhan Financial Services Fund (NFO) – Issue details.
Here are the NFO issue details.
| NFO Opens | 10-Jul-23 |
| NFO closes | 24-Jul-23 |
| Scheme reopens for continuous purchase/sale | Within 5 business days |
| Minimum Application Amount | Rs 1000 and in multiples of Rs 1 thereafter |
| Minimum SIP | Rs 100 for 6 months |
| NAV of the fund | Rs 10 during NFO period |
| Entry Load | Nil |
| Exit Load | 1% for redemption within 365 days |
| Risk | Very High Risk |
| Benchmark | NIFTY Financial Services TRI |
| Fund Manager | Manish Gunwani Sumit Agrawal |
Bandhan Financial Services Fund SID
What is the investment objective of this MF scheme?
The scheme seeks to generate long-term capital appreciation by investing predominantly in equity and equity related instruments of companies engaged in financial services.
There is no assurance or guarantee that the investment objective of the scheme will be realized.
Where does the scheme invest?
Below is the allocation strategy of the fund.
| Type of instruments | Min % | Max % | Risk Profile |
|---|---|---|---|
| Equity and equity related instruments of companies engaged in financial services sector |
80% | 100% | Very high |
| Equities & Equity related securities other than above and overseas securities* |
0% | 20% | Very high |
| Debt Securities and Money Market Instruments (including Government securities, Securitised debt) |
0% | 20% | Low to Moderate |
| Units issued by REITs & InvITs | 0% | 10% | Very high |
Performance of existing Financial Services Funds
Here is the performance of existing funds from this sector.
| Scheme Name | 3 Yrs | 5 Yrs | 10 Yrs |
|---|---|---|---|
| Sundaram Financial Services Opportunities Fund | 27% | 14% | 15% |
| Tata Banking And Financial Services Fund | 24% | 13% | NA |
| SBI Banking & Financial Services Fund | 23% | 12% | NA |
| Taurus Banking and Financial Services Fund | 23% | 12% | 14% |
| Invesco India Financial Services Fund | 23% | 11% | 17% |
| ICICI Prudential Banking and Financial Services Fund | 26% | 11% | 18% |
| Nippon India Banking & Financial Services Fund | 31% | 11% | 16% |
| LIC MF Banking & Financial Services Fund | 25% | 10% | NA |
| Aditya Birla Sun Life Banking and Financial Services Fund | 26% | 10% | NA |
| Baroda BNP Paribas Banking and Financial Services Fund | 21% | 9% | 13% |
| IDBI Banking & Financial Services Fund | 21% | 9% | NA |
| UTI Banking and Financial Services Fund | 25% | 8% | 13% |
Why to invest in Bandhan Financial Services Fund NFO?
This fund invests in companies that are part of banking, financial services, NBFC, Insurance, Broking, Microfinance companies, Housing, wealth management, etc. We could see consistent growth in this segment for the past few years.
There is a potential opportunity lies in India compared to the global economy. As an example, Life Insurance constitutes 3%, whereas in top 10 penetrated countries it is over 10%. Bank branches per 1,000 population is at 15% compared to developed countries average of 27%.
The banking sector has been ever green sector over the decade. Banks valuations close to long period averages.
There is growing working population which can drive demand in this sector.
Risk factors in such funds
One should consider some of these risk factors / negative factors before investing.
1) This fund focuses solely on a specific industry, making it a sector fund. Any decline in that particular sector can have an impact on the mutual fund’s performance. These types of funds can either outperform or underperform in the short term.
2) An increase in Non-Performing Assets (NPAs) can have a negative effect on the performance of banks and Non-Banking Financial Companies (NBFCs), which can subsequently affect share prices and, consequently, the fund’s performance.
3) Pandemics can result in a surge in insurance claims, which can impact the performance of insurance companies.
4) Investing in fintech companies carries a high level of risk. For instance, recent times have seen significant losses for investors in companies like Paytm, Nykaa, and Zomato.
5) You can refer complete risk factors of investing in this scheme to SID / KIM / NFO prospectus.
Also Read: How to create 1 Crore with 5,000 SIP per month?
Bandhan Financial Services Fund NFO – Should you invest?
This mutual fund primarily invests in the banking and financial services sector, including banking institutions, non-banking financial companies (NBFCs), fintech companies, insurance companies, and more. Excluding fintech companies, this sector has consistently performed well over the past decade, generating annualized returns ranging from 13% to 18%.
However, it’s important to note that this mutual fund focuses solely on a single sector, which carries a higher level of risk. Any downturn in this sector in the future could impact the fund’s performance. Additionally, the share prices of fintech companies have experienced a significant decline due to overvaluations.
Investors with a high risk appetite seeking to explore new BFSI (Banking, Financial Services, and Insurance) mutual funds can consider investing in these funds for the medium to long term. Alternatively, they can choose to invest in established banking and financial services mutual funds that have demonstrated a track record of success across various market cycles.
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