Would IDFC Transportation and Logistics Fund NFO benefit from National Logistics Policy and EV initiative?
IDFC MF has launched Transportation and Logistics Fund (new fund offer). This NFO would open for subscription on 4th October, 2022. This mutual fund scheme would invest majorly in companies that are from the transportation and logistics segment. Govt of India has brought logistics policy recently which would push this sector massively in coming years. Should you invest in IDFC Transportation and Logistics Fund NFO? What are the various risk factors associated with such funds?
IDFC Transportation and Logistics Fund (NFO) – Issue details
IDFC Transportation and Logistics Fund is an open-ended equity scheme that invests in transportation and logistics sectors.
|Scheme reopens for continuous purchase/sale||Within 5 working days|
|Minimum Lumpsum||Rs 1,000|
|Minimum SIP||Rs 1,000 for 6 months|
|NAV of the fund||Rs 10 during NFO period|
|Exit Load||1% if exited within 1 year|
|Risk||Very High Risk|
|Benchmark||Nifty Transportation & Logistics Index|
|Fund Manager||Mr. Daylynyn Pinto (Equity)
Mr. Harshal Joshi (Debt)
Ms. Nishitha Doshi (Overseas Investment Portion)
What is the investment objective of this MF scheme?
The scheme seeks to generate long-term capital growth by investing predominantly in equity and equity related securities of companies engaged in the transportation and logistics sector.
There is no assurance or guarantee that the investment objective of the scheme will be realized.
What is the allocation pattern in this mutual fund?
This fund invests pattern is as follows:
|Type of instruments||Min %||Max %||Risk Profile|
|Equities & Equity related securities of
companies engaged in the transportation and logistics sector
|Equities & Equity related securities other
than above and overseas securities (Including overseas investments)
|Debt and Money Market Securities||0%||20%||Low to Medium|
Why there is focus now on transportation and logistics sector now?
We indicated in our article earlier in ICICI Pru Transportation and Logistics Fund NFO Review about the reasons mutual fund houses are floating such funds in this sector.
One of the main reason is about the National Logistics Policy was launched by Prime Minister Mr Narendra Modi which is the logical next step to provide a comprehensive agenda to develop the entire logistics ecosystem with 2 major visions.
First step is to reduce logistics cost in India by 5% of GDP over the next 5 years.
Second step is to improve India’s ranking in the Logistics Performance Index (LPI). It also aims to enhance logistics sector competitiveness through a unified policy environment and an integrated institutional mechanism.
The policy seeks to pave the way for India to become a logistics hub by providing seamlessly integrated multiple modes of transportation by leveraging technology, processes and skilled manpower.
Another reason is about pushing EV policy can also push transport segment.
Performance of existing transportation and logistics funds
There is only existing fund in this sector, which is UTI Transport and Logistics Fund. Here is the performance of the fund (direct plan).
- Last 7 years annualized returns – 10%
- Last 5 years annualized returns – 7.5%
- Last 3 years annualized returns – 21%
- Last 1 years annualized returns – 27%
In fact the majority of the last 1 year returns indicated above in the last 3 months after the logistic policy has been discussed.
Why to invest in IDFC Transportation and Logistics Fund NFO?
- Transportation and logistics sector is expected to boom in the coming years with Govt of India National Logistic Policy which was announced a few days back.
- Govt push on EV sector is also expected to boost this segment.
- Mutual fund schemes that invest in these companies are expected to benefit with such potential growth as well as regulatory changes.
Risk factors in such funds
One should consider some of these risk factors / negative factors before investing.
- Since this fund invests only in a single sector, it is classified as a sector fund. Any down trend in this segment can impact the mutual fund.
- While there is push from government on new logistics policy, we do not know how successful this initiative would be in coming years.
- You can refer complete risk factors of investing in this scheme to SID / KIM / NFO prospectus.
IDFC Transportation and Logistics Fund NFO – Should you invest?
This fund invests in companies that are part of the transportation and logistics sector. Govt initiatives like India national logistics policy and Govt push on EV segment are expected to boost this sector in coming years.
On the other hand, this mutual fund invests in single sector and high risk. Any down trend in this sector in coming years can impact the fund performance.
High risk investors can invest in such funds or in an existing fund for 3-5 year timeframe. If you are looking for long term perspective, better to invest in a diversified portfolio of mutual funds and avoid this fund.
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