ITI Mutual Funds has launched Pharma and Healthcare Fund (new fund offer). This NFO would open for subscription on 18th October 2021. As the name indicates, this fund invests in Healthcare and Pharma companies in India. Pharma and Health care companies benefitted most during this covid-19 pandemic. However, looks we reached the higher levels and one cannot expect similar returns in the near term. In this situation, should you invest in ITI Pharma and Healthcare Fund NFO then? What are the various risk factors associated with such funds?
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ITI Pharma and Healthcare Fund (NFO) – Issue details.
ITI Pharma and Healthcare Fund is an open-ended equity scheme investing in Pharma and Healthcare.
| Scheme Opens | 18-Oct-21 |
| Scheme Closes | 01-Nov-21 |
| Scheme reopens for continuous purchase/sale | 17-Nov-21 |
| Minimum Lumpsum | Rs 5,000 |
| Minimum SIP | Rs 1,000 for 6 months |
| NAV of the fund | Rs 10 during NFO period |
| Entry Load | Nil |
| Exit Load | 1% – If redeemed within 12 months Nil – If redeemed > 12 months |
| Risk | Very High Risk |
| Benchmark | Nifty Healthcare TRI |
| Fund Manager | Mr. Pradeep Gokhale and Mr. Rohan Korde |
| Max TER | 2.25% |
ITI Pharma and Healthcare Fund SID Link
What is the investment objective of this MF scheme?
The investment objective of the scheme is to seek to generate long term capital appreciation through investing in equity and equity related securities of companies engaged in Pharma and Healthcare.
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 investment pattern is as follows:
| Type of instruments | Min % | Max % | Risk Profile |
| Equity & Equity related instruments of companies engaged in pharma and healthcare |
80% | 100% | High |
| Equity and Equity related securities of other Companies |
0% | 20% | High |
| Listed Preference Shares | 0% | 10% | Medium to High |
| Debt and Money Market Instruments | 0% | 20% | Low to Medium |
| Units issued by REITs and InvITs | 0% | 10% | Medium to High |
Why to invest in ITI Pharma and Healthcare Fund NFO?
This fund invests in Healthcare and Pharma sector, which is evergreen sector. This sector has outperformed in the last 15-20 years. It is expected to continue to grow in future too.
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 is classified as sector fund as it invests only in single sector. If the sector is in down trend, it would reflect in the fund performance too, hence it is high risk fund.
2) This sector might underperform for several years like it happened during 2016 to 2020. It generated 20% negative returns during this period. Investors need to have patience to get good returns.
3) This fund invests in derivatives up to 50% of its portfolio which are high risk.
4) It invests in foreign securities and ADRs/GDRs up to 20%. Investing in foreign assets has currency risk and geopolitical risks.
5) This fund invests in debt instruments where there are interest rate risks, liquidity risks and default risks.
6) It also invests in REITs and InvITs which are high risk.
7) You can refer complete risk factors of investing in this scheme in SID / KIM / NFO prospectus.
Historical Performance of Healthcare and Pharma Funds
Here is the quick snapshot on the performance of the existing funds from this category. Returns indicated are for regular plans as historical performance not available for 10 years time frame for direct funds.
| Scheme Name | 3 Yrs | 5 Yrs | 10 Yrs |
|---|---|---|---|
| Nippon India Pharma Fund | 26.7% | 16.3% | 18.9% |
| SBI Healthcare Opportunities Fund | 24.6% | 10.1% | 18.3% |
| Tata India Pharma & HealthCare Fund | 26.2% | 13.3% | NA |
| UTI Healthcare Fund | 25.7% | 12.6% | 15.9% |
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ITI Pharma and Healthcare Fund NFO – Should you invest?
ITI Pharma and Healthcare Fund invests in Healthcare and Pharma sector companies and some portion in foreign assets and ADR/GDRs etc. While this sector is ever green in the long term, one can see high volatility / down trend in the short and medium term. This sector generated outstanding returns in the last 1.5 years due to covid-19. However, one should not expect such high returns in the coming years. This new fund is little late in the bull run now. It invests only in single sector, hence there is concentration risk. High risk investors who want to test with new funds can invest in this NFO. Otherwise, one can invest in existing pharma and healthcare funds that has outstanding performance in the medium to long term.
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