Bandhan Financial Services Fund – NFO Details and Review

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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