Edelweiss Focused Equity Fund – Should you invest in this NFO?

Edelweiss mutual funds has launched Focused Equity Fund New Fund Offer. This NFO would open for subscription on 12th July, 2022. This is a flexi-cap mutual fund scheme that invests up to 30 stocks across various market capitalizations i.e. largecap, midcap and smallcap.  There are currently several focused equity mutual funds in India. These funds generated mixed performance of 8% to 15% annualized returns in the last 5 years. Should you invest in Edelweiss Focused Equity Fund NFO or avoid?

Also Read: Best Largecap and Midcap Mutual Funds to invest in 2022

Edelweiss Focused Equity Fund NFO – Issue Details

Here are the issue details.

Scheme Opens 12-Jul-22
Scheme Closes 25-Jul-22
Scheme reopens for continuous purchase/sale 05-Aug-22
Minimum Lumpsum Rs 5,000
Minimum SIP Rs 500 for 12 months
NAV of the fund Rs 10 during NFO period
Entry Load Nil
Exit Load 1% if redeemed within 365 days
Risk Very High Risk
Benchmark NIFTY 500 Total Return Index
Fund Manager Mr. Trideep Bhattacharya
Co-Fund Manager: Mr. Abhishek Gupta
Max TER 2.25%

Edelweiss Focused Equity Fund SID

What is the investment objective of Edelweiss Focused Equity Fund?

The investment objective of the fund is to generate long term capital appreciation by investing in equity and equity related instruments of upto 30 companies across market capitalisation.

However, there is no assurance or guarantee that the investment objective of the Scheme will be achieved. The scheme does not assure or guarantee any returns.

What is the allocation pattern in this mutual fund scheme?

This fund investment pattern is as follows:

Type of instruments Min % Max % Risk Profile
Equity and Equity related instruments 65% 100% High
Debt and Money Market Securities 0% 35% Low to Medium
Units issued by REITs and InvITs 0% 10% Medium to High

Can NRI invest in this MF scheme?

Yes, they can invest in this scheme. They can invest on repatriation or non repatriation basis.

Why to invest in the Edelweiss Focused Equity Fund?

Here are a few reasons to invest in this fund. While flexicap invest in any number of stocks across market cap, focusssed funds invests up to 30 stocks only.

1) This fund is a flexi-cap / focused fund that invests across market cap i.e. large cap, midcap and small cap stocks that acts like a diversification.

2) This mutual fund invests maximum of 30 stocks which can help to focus on a limited number of stocks by the fund manager. Such strategy can help to maximize returns instead of large number where one can loose focus.

3) Focused funds category generated 8.5% to 15.5% annualized returns in the last 5 years.

Major risk factors you should consider before investing in such funds

Below are some of the risk factors in such funds.

1) The fund invests in mid-cap and small-cap stocks which are high risk. Currently we are already seeing this downfall in these 2 segments. Many midcap and smallcap stocks has fallen over 50% in the last 3 months.

2) This fund invests in debt segment where there is interest rate risk, credit risk, liquidity risk, reinvestment risk and concentration risk.

3) There is no guarantee that debt segment of this fund can generate returns. E.g. in the last 1 year during pandemic, debt funds generated 3% to 4% returns only.

4) This fund invests in REITs and InvITs which are high risk.

5) Investors need to refer scheme information document (SID) for complete risk factors.

How is the Performance of Focused Mutual Funds category?

Now, let us look at existing focused funds based on last 5 years returns. These funds generated 8.5% to 15.5% annualized returns in the last 5 years.

Scheme Name  3 Yrs 5 Yrs
IIFL Focused Equity Fund 18.3% 15.7%
SBI Focused Equity Fund 14.9% 14.3%
ICICI Prudential Focused Equity Fund 16.9% 12.9%
Sundaram Focused Fund 15.8% 12.6%
Franklin India Focused Equity Fund 14.3% 12.4%
Axis Focused 25 Fund 11.2% 11.6%
Nippon India Focused Equity Fund 16.5% 11.5%
HDFC Focused 30 Fund 14.1% 9.8%
DSP Focus Fund 9.7% 8.7%
IDFC Focused Equity Fund 11.8% 8.6%

Also Read: Mutual Funds that are generating positive returns every quarter in last 3 years

Should you invest in Edelweiss focused Equity NFO?

Edelweiss Focused Equity Fund NFO invests in 30 stocks across various marketcap. Investing in such focused mutual fund is a good idea which can help like diversification within your portfolio.

However, one should note that new funds do not have past performance, hence difficult to say whether this fund would perform well in future or not. If you want to take risk and test such fund, you can invest now.

Alternatively, you can invest in some of the Focused Funds or Best Flexicap Mutual Funds that are already existing and proven the performance in the last 3-5 years.

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Suresh KP

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