ITI Focused Equity Fund (NFO) – Analyzing Pros and Cons for Savvy Investors
ITI mutual funds has launched Focused Equity Fund NFO. This NFO would open for subscription on 29th May, 2023. This is a flexi-cap mutual fund scheme that invests up to 30 stocks across various market capitalizations i.e. Large cap, Midcap and smallcap. There are currently several focused equity mutual funds in India. These funds generated mixed performance of 9% to 15% annualized returns in the last 5 years. In this article, we would get into the details of the ITI Focused Equity Fund, exploring its NFO (New Fund Offer) dates, investment strategy, pros, cons and concluding insights.
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ITI Focused Equity Fund NFO – Issue Details
Here are the issue details.
| NFO Period | 29th May to 12th June 2023 |
| Scheme reopens for continuous purchase/sale | Within 5 working days |
| Minimum Application Amount | Rs 5000 and in multiples of Rs 1 thereafter |
| Minimum SIP | Rs 500 and in multiples of ₹1/- thereafter |
| NAV of the fund | Rs 10 during NFO period |
| Entry Load | Nil |
| Exit Load | 1% for redemption within 360 days |
| Risk | Very High Risk |
| Benchmark | NIFTY 500 TRI |
| Fund Manager | Dhimant Shah Rohan Korde |
What is the investment objective of ITI Focused Equity Fund?
The investment objective of the scheme is to seek to generate long term capital appreciation through investing in a concentrated portfolio of equity & equity related instruments of up to 30 companies across market capitalization.
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.
Investing in ITI Focused Fund, a new fund offer that focuses on a concentrated portfolio of equity and equity-related instruments, has its own set of pros and cons.
ITI Focused Equity Fund NFO – Why to invest?
Focused Portfolio: ITI Focused Fund concentrates its investments in a limited number of companies (up to 30) across different market capitalizations. This approach allows the fund manager to deeply analyze and select potentially high-performing stocks, which may lead to better returns if the chosen companies perform well.
Potential for Higher Returns: With a concentrated portfolio, ITI Focused Fund has the potential to deliver higher returns if the selected stocks perform exceptionally well. This can be beneficial for investors seeking higher growth and willing to take on more risk.
Flexibility in Market Cap Allocation: The fund has the flexibility to invest across different market capitalizations, including large-cap, mid-cap, and small-cap stocks. This enables the fund manager to adjust the portfolio based on market conditions and capitalize on opportunities across various segments of the market.
Risk Factors in ITI Focused Equity Fund NFO
Higher Risk: Concentrated portfolios inherently carry higher risk compared to diversified portfolios. Investing in a limited number of companies exposes investors to the volatility and potential underperformance of individual stocks. If any of the chosen stocks perform poorly, it can significantly impact the overall returns of the fund.
Lack of Diversification: The fund’s focus on a limited number of companies means that it may lack the benefits of diversification that come with investing across a broader range of stocks. Diversification helps reduce risk by spreading investments across different sectors, industries, and geographies.
Market Timing and Stock Selection Risk: The performance of ITI Focused Fund heavily relies on the fund manager’s ability to time the market and select the right stocks. Poor market timing or incorrect stock selection could lead to underperformance compared to the benchmark index and other funds in the same category.
Potential for Volatility: Concentrated funds are susceptible to higher volatility compared to more diversified funds. Changes in market sentiment or adverse events affecting specific companies can have a significant impact on the fund’s returns.
Limited Track Record: As a new fund offer, ITI Focused Fund may not have an extensive track record to evaluate its performance and consistency over different market cycles. This lack of historical data can make it challenging for investors to assess the fund’s long-term potential. 5) Investors need to refer scheme information document (SID) for complete risk factors.
Performance of Focused Mutual Funds category
Now, let us look at the performance of existing focused funds. These funds generated 9% to 15% annualized returns in the last 5 years.
| Scheme Name | 3 Yrs | 5 Yrs | 10 Yrs |
|---|---|---|---|
| Nippon India Focused Equity Fund | 34% | 13% | 19% |
| Franklin India Focused Equity Fund | 33% | 15% | 19% |
| Quant Focused Fund | 29% | 14% | 18% |
| SBI Focused Equity Fund | 26% | 13% | 16% |
| Sundaram Focused Fund | 27% | 14% | 15% |
| HDFC Focused 30 Fund | 38% | 14% | 15% |
| Aditya Birla Sun Life Focused Equity Fund | 25% | 12% | 15% |
| ICICI Prudential Focused Equity Fund | 28% | 15% | 15% |
| Motilal Oswal Focused Fund | 21% | 11% | 14% |
| JM Focused Fund | 25% | 9% | 14% |
| Axis Focused 25 Fund | 19% | 9% | 14% |
| DSP Focus Fund | 23% | 10% | 14% |
| Bandhan Focused Equity Fund | 24% | 9% | 12% |
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Should you invest in ITI focused Equity NFO?
Investing in ITI Focused Fund, a new fund offer with a concentrated portfolio of up to 30 companies across market capitalization, has its own set of pros and cons.
On the positive side, the fund’s focused portfolio allows for in-depth analysis and potential high returns if the selected stocks perform well. This fund has flexibility to allocate investments across different market caps. This category of funds generated 14% to 19% annualised returns in the last 10 years.
However, the concentrated approach brings higher risk and lack of diversification, making the fund susceptible to volatility and potential underperformance if market timing or stock selection goes wrong.
High risk investors can invest in such funds. Alternatively investors can look for some of the best flexicap mutual funds that can generate higher returns with similar risk in medium to long term.
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Sir, Thanks for your post. Every year you recommend certain 5 stocks each from big, medium and small cap companies. It seems this year you missed out such recommendation. Or may be I missed out. Can you please suggest some. Thanks
Hello AP, I generally give such recos on mutual funds and not on stocks.
Sir, I have been following your recommendations for many years. You did give recommendation of multibagger stocks in previous years on dates 4.1.21, 20.1.22, 2.2.22, 7.2.22, etc. I have been your staunt follower. Even if I have to pay fees I am ready to do that. Thanks
Hello Mr. AP Singh, I responded to your email too. I would occassionally do stock recommendations which I would do for myself and post on this blog. However for mutual funds, every year, I post largecap midcap and smallcap mutual funds analysis and post on this blog. You would have seen this by coincidence. If I find something in next couple of weeks or months, I would definitely post them here