Edelweiss MSCI India Domestic & World Healthcare 45 Index Fund – Is this a opportunity to invest in top healthcare companies in India and around the world?
Edelweiss Mutual Fund is planning to launch MSCI India Domestic and World Healthcare 45 Index Fund that would open for subscription on October 6, 2020. This fund would replicate MSCI India Domestic & World Healthcare 45 Index Fund except the tracking error. While pharma and healthcare sector is doing well in India and created good opportunities, this fund would invest both in Indian Pharma/Healthcare industry + World healthcare industry too. This is unique fund which invests in this index that has such a hybrid model. Should you invest in Edelweiss MSCI India Domestic & World Healthcare 45 Index Fund NFO?. What are the risk factors of investing in such mutual fund schemes.
Edelweiss MSCI India Domestic & World Healthcare 45 Index Fund (NFO) – NFO Issue Details
This is an open-ended equity mutual fund scheme. Here are the NFO details.
|Scheme reopens for continous purchase/sale
|After 5 working days from closure of NFO
|Direct and Regular
Growth and Dividend
|Minimum investment (Lumpsump)
|Minimum investment (SIP)
|Rs 500 / 12 months
|NAV of the fund
|Rs 10 during NFO period
|0.5% if exited within 3 months
|Max Total expense Ratio (TER)
|MSCI India Domestic & World Healthcare 45 Index
What is the investment objective of this MF scheme?
The mutual fund would invest in stocks comprising of the MSCI India Domestic & World Healthcare 45 Index with an objective to provide investment returns that, closely corresponds to the returns equivalent to the index, subject to tracking errors (before expenses).
There is no assurance or guarantee that the investment objective of the scheme will be realized.
Who is eligible to invest in this mutual fund scheme?
The following can invest in this scheme.
1) Indian resident adult individuals, either singly or jointly.
2) Minors through Parents/Lawful Guardian.
3) Hindu Undivided Family (HUF) through its Karta.
4) Partnership Firms in the name of any one of the partners.
5) Proprietorship in the name of the sole proprietor.
6) Companies, Societies etc.
8) Non-Resident Indians (NRIs) / Persons of Indian Origin (PIO) on full repatriation basis or on non-repatriation basis;
Complete list of eligible participants who can invest can be checked in the NFO prospectus.
Who are the Fund Managers of Edelweiss MSCI India Domestic & World Healthcare 45 Index Fund?
Here are the fund manager’s details.
Mr. Hardik Varma
Mr. Mayur Dharmshi (for investments in foreign securities)
What is the allocation pattern in this mutual fund?
This fund investment pattern is as follows:
|Where it invests
|Stocks comprising MSCI India Domesc & World Healthcare 45 Index
|95% to 100%
|Debt and Money Market Instruments/Units of Liquid Mutual Funds
|0% to 5%
|Low to Medium
|India Healthcare component
|Top 25 stocks based on Market cap size and Sub-sectors covered are Pharma, Hospitals, Diagnoscs, Life science tools & Services and Biotechnology
|World Healthcare component
|It invests 30% in World healthcare component – Top 5 stocks based on Market cap size & overall 20 stocks and Sub-sectors covered are Pharma, Hospitals, Diagnostic, Life science tools & Services
Why to invest in the Edelweiss MSCI India Domestic & World Healthcare 45 Index Fund?
Here are a few reasons to invest in such debt funds.
1) Pharma and Healthcare sector has been consistently growing till 4-5 years back. However, this is the only sector in India that has been underperforming in the last few years. However, it has bounced back post covd-19 crisis and has a strong potential to grow steadily in the coming decade, given rising lifestyle diseases and rise in spending to treat them. Underlying stock valuations are reasonable and the growth opportunity in the sector is big. We have recently even recommended some of the best pharma mutual funds to invest in 2020.
2) This fund would invest in an index that has exposure to fast-growing Indian healthcare companies and the world’s largest innovative healthcare companies listed in the US.
3) Index funds would come with less bias from the fund manager. This fund would replicate the index.
4) Since it is an index fund, it has a low expense ratio. The returns from such funds could be high due to this.
Some key risk factors you should consider before you invest in such funds
One should consider some of these risk factors / negative factors before investing.
1) This fund invests only in Pharma and healthcare sector and this is a thematic/sector fund. Such funds focus is only in one sector. Hence, in case there are down trends in this sector, investors need to satisfy with negative or low returns during that period.
2) Thematic funds are low correlated with the broader market. Their performance can be in divergence with the broader market. Investing for short term horizon only if you can take tactical calls of entry and exit.
3) Such funds can have a huge fall during the stock market crash. Investors should understand the risks involved in investing in a single sector.
4) This fund invest 30% of its portfolio in healthcare sector in the US. Such investment portion would have Geo political risks, currency risk and exchange rate risks.
5) This fund invests 30% in the US healthcare sector stocks. President elections are scheduled during November 3, 2020. This would create some volatility in the US stock markets.
6) You can refer complete risk factors of investing in this particular scheme in SID / KIM / NFO prospectus.
Performance of Underlying Index
Since this fund would invest in an index, let us check how this index has been performing in the last 12 years.
If you observe, this index is the worst performer in the last 5 years. However, we are able to see the revival of this index in the last 6 months post covid-19 which has created enormous opportunities in this sector (see below tables too).
Should you invest in Edelweiss MSCI India Domestic & World Healthcare 45 Index Fund NFO?
Edelweiss MSCI India Domestic & World Healthcare 45 Index Fund invests in an index that has 70% Indian healthcare industry + 30% world healthcare industry (mostly US). This invests in an index where we know how this index performed in the last 10 years. While the index performance is pathetic in the last few years, it started reviving in the last few months. Currently the economies are reviving post covid-19 crisis. High risk investors can invest in such hybrid healthcare funds. Moderate to low risk takers can stay away from such funds.
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