IDFC Emerging Businesses Fund NFO – Smallcap Fund – Should you invest?

1 comment

IDFC Emerging Businesses - Smallcap Mutual Fund NFO ReviewIDFC Emerging Businesses Fund NFO Review

Small cap stocks are bouncing back in the last couple of months. To encash the opportunities in a small cap segment, IDFC Mutual Fund has come up with its new small cap mutual fund scheme. IDFC Emerging Businesses Fund NFO would open for subscription on 3rd February, 2020. This small cap fund from IDFC MF would invest in small cap stocks in India. Currently the small cap segment is bouncing back in the last 3-4 months, which shows clearly in the small cap mutual fund performance. In these circumstances, Should you invest in IDFC Emerging Businesses Fund NFO? What are the risk factors an investor should consider before investing in such small cap mutual fund schemes?

Also Read: Best Midcap Mutual Fund Schemes to invest in 2020

IDFC Emerging Businesses Fund NFO Issue Details

This is an open-ended mutual fund equity scheme.

This is a small cap mutual fund scheme that invests in small cap stocks in India. These small cap stocks would be from the 251st company in terms of market capitalization.

This scheme would open for subscription on 3rd February, 2020.

This scheme would close for subscription on 17th February, 2020.

Since this is an open ended scheme, it would again open for subscription after 5 business days from the date of allotment of Mf units after the NFO period.

This scheme is available in both regular and direct plans.

This plan offers both growth option and dividend option.

This scheme is available for lump sum and SIP investment.

Minimum investment is Rs 5,000 and in multiples of Rs 1 there-off for lump sum investments.

Minimum investment is Rs 100 per month for monthly SIP and for a tenure of 6 months.

The NAV of the NFO is Rs 10 per unit now during initial subscription.

There is no entry load to invest in this mutual fund scheme.

If one wants to exit before 1 year from the date of investment, there is a 1% exit load.

This scheme is classified as moderately high risk scheme.

Scheme total expense ratio (TER) is estimated at a maximum of 2.25% of the total assets on any day.

IDFC Emerging Businesses Fund NFO details can be downloaded from here.

Who can invest in this mutual fund scheme?

Any of the following can invest in this scheme in this scheme.

1) Resident Individuals

2) Resident Indian Nationals, including partnership forms, companies, Banks, HUFs, Sole Proprietorship etc.,

3) NRI’s

4) Foreign Portfolio Investors

Who is the Fund Manager of IDFC Emerging Businesses Fund NFO NFO?

Mr. Anoop Bhaskar will be the fund manager of the Scheme.

Mr. Viraj Kulkarni will be managing overseas investments of the Scheme

What is the benchmark for this scheme?

The benchmark for this scheme is S&P BSE 250 Small Cap TRI.

What is the investment objective and strategy of this IDFC Emerging Businesses Fund NFO?

The Fund seeks to capture opportunities available in the small cap segment. The fund shall invest a minimum of 65% of its corpus in the small cap space. The remaining portion will be invested depending on the market conditions and in line with the fund manager views.

What is the allocation pattern in this mutual fund scheme?

This fund investment pattern is as follows:

1) It invests 65% to 100% in equity and equity related Instruments of small cap companies in India. The risk profile in this segment is medium to high.

2) It invests 0% to 35% in equity and equity related instruments of other companies. The risk profile in this segment is medium to high.

3) It invests 0% to 35% in debt and money market instruments including government securities. This risk profile in this segment is low to medium.

4) It would invest 0% to 10% in units issued by REITs and InvITs. The risk profile in this segment is medium to high.

5) Investment in Foreign securities – up to 35% of the total assets

6) Investment in Securities lending – up to 20% of the total assets with maximum single party exposure restricted to 5% of the total assets.

7) Exposure in Derivatives (other than for hedging purpose) – up to 50% of total assets.

8) Gross Exposure to Repo of Corporate Debt Securities – up to the extent permitted by the Regulations (currently up to 10% of total assets, subject to change in line with the regulations from time to time)

Can NRI invest in this MF scheme?

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

Why should you invest in such Small Cap Fund now?

Here are few reasons to invest in small cap funds.

1) The universe of small cap stocks is very high. Any company with 251st  + company in terms of market capitalization is termed as small cap and there are thousands of companies to invest. This provides a large scope to invest in a variety of companies.

2) There are several companies in the small cap segment, which are emerging now and that have high potential for investment.

3) The small Cap segment has fallen by over 30% in the 2018. Every time there is fall in small cap stocks, there is a bounce back in subsequent years. This trend is seen in the last 10 years for several times. If you observe this segment has bounced back in the last 3-4 months. This momentum is expected to continue.

Some key risk factors you should consider before you invest in such small cap funds

One should consider some of these risk factors / negative factors before investing.

1) This scheme invests in small cap stocks that are high risk. Even if Sensex/NIFTY is moving in a positive direction, small cap stocks can move in a negative direction (which we are seeing now in the last 1 year). Hence Stock Market direction could be different from SENSEX Vs Small cap stocks.

2) Investors should not assume any guaranteed returns from such small cap mutual fund schemes.

3) Since it is a new mutual fund scheme, there is no past performance, hence we would know how the fund would perform in the future.

4) It invests upto 35% in debt instruments where there is interest rate risk.

How is the Performance of Small Cap Mutual Funds in India?

Currently there are existing small cap mutual fund schemes in India. While the small cap funds have picked-up only in the last 3-4 months after almost 1.5 to 2 years of downfall, this picture would help you to know the potential opportunities of investing in small cap funds. Let us see how some of the small cap funds performing in the last 5-10 years.

1) SBI Smallcap Fund: This fund gave 19% annualized returns in the last 10 years, 14% annualized returns in the last 5 years, 15% annualised returns in the last 3 years. This fund gave 20% returns in the last 1 year and 8% returns in the last 3 months, indicating a strong bounce back after 1.5 to 2 years of under performance in the small cap segment.

2) Axis Smallcap Fund: This fund gave 13% annualized returns in the last 5 years and 16% annualised returns in the last 3 years. This fund gave 33% returns in the last 1 year and 10% returns in the last 3 months, indicating a strong bounce back after 1.5 to 2 years of under performance in the small cap segment.

3) Nippon (earlier Reliance) Small cap Fund: This fund gave 11% annualized returns in the last 5 years and 9% annualised returns in the last 3 years. This fund gave 10% returns in the last 1 year and 8% returns in the last 3 months.

You may like: 10 Best Thumbrules of Investing you should know

Should you invest in the IDFC Emerging Businesses Fund NFO?

One year back, I have indicated that it would bounce back by the end of Dec or by early 2020. The small cap segment is showing signs of good improvement in the last 3-5 months. IDFC Small Cap Mutual Fund is a relatively new fund in the small cap segment. However, considering growth opportunities in a small cap segment, high risk investors can invest in this scheme. If you do not want to test with new MFs, you can invest in some of  the best small cap mutual fund schemes which we recommended few days back.

If you like this article, please share this on your Facebook or Twitter. This would be a special gift which you would be giving to our blog.

Suresh KP

IDFC Emerging Businesses Fund NFO Review

Suresh KP
Latest posts by Suresh KP (see all)

Related Articles:

Tagged with , , , ,

One comment

Leave a Reply

Your email address will not be published. Required fields are marked *