Three interesting NFOs to look forward to; Bandhan, Canara Robeco, DSP

In this issue, we look at 3 more interesting funds that are expected to open their NFOs (new fund offerings) in the month of June or in early July 2023. In the last few months, several unique NFOs have been launched and positioned in India. While most NFOs typically focus on index funds or on thematic funds, there are also the regular large cap, mid cap, small cap, and flexi cap funds tapping the investors through the NFO route. In this segment we look at the

1. Bandhan Financial Services Fund

Bandhan group (of the microfinance bank fame) has taken over IDFC Mutual Fund after the latter decided to exit the mutual funds business as part of the group restructuring. Post the takeover, all the IDFC funds were renamed as Bandhan funds. To make up for the shortfall in the product basket, Bandhan MF is launching the NFO (new fund offering of the Bandhan Financial Services Fund.

The Bandhan Financial Services Fund seeks to generate long-term capital appreciation by investing predominantly in equity and equity related instruments of companies engaged in financial services. When we talk of financial services, it would cover the gamut of banking, development financial institutions, NBFCs, insurers, asset management companies, brokers and even stock exchanges. This would include investments in small cap stocks, mid-cap stocks and large cap stocks. The fund would also look at opportunities in the fast growing and emerging Fintech space, where a number of listed companies are expected to hit the Indian markets in the near future. A small portion of the fund would also be allocated to debt and money market instruments.

The fund manager for the Bandhan Financial Services Fund will be Manish Gunwani, a seasoned fund manager professional who is a qualified B-Tech and PGDM. Prior to joining Bandhan Mutual Fund, Manish Gunwani managed funds for Nippon India Mutual Fund and ICICI Prudential Mutual Fund. He has also worked as an analyst at BRICS and Lehman.

The NFO of Bandhan Financial Services Fund opens on 10-July-2023 and closes for subscription on 24-July 2023. It is an open ended fund so the fund will be available for NAV related fund purchase and redemption on a regular basis once the NFO allocation is completed. Being a thematic equity related fund, it is high on the risk scale as there is the risk of equities as well as of cap allocation and sector concentration.

The Bandhan Financial Services Fund will offer growth and IDCW (income distribution cum capital withdrawal) options to the investors. In addition, investors can either opt for the regular plan or the Direct Plan, which has a relatively lower expense ratio. As is the norm, there is no entry load in the fund but an exit load of 1% will be levied if the fund is redeemed or switched out before a period of 365 days from the date of purchase. The minimum investment in the fund is ₹1,000 and the performance of the fund will be benchmarked to the Nifty Financial Services TRI index. Here TRI refers to the total returns index, which is more representative.

2. Canara Robeco Multi-Cap Fund

The Canara Robeco Multi-Cap Fund comes from the house of Canara Robeco, which is one of the fastest growing mutual funds with a good performance to boot. Canara Robeco offers a wide spectrum of funds across equity and debt and many of its funds are in the top quartile of performers in the mutual funds space.

The Canara Robeco Multi-Cap Fund seeks to generate long-term capital appreciation by investing predominantly in a diversified portfolio of equity and equity related securities of companies across market cap themes. The fund will invest across large cap, mid-cap, and small cap stocks. Unlike the flexi-cap fund which has leeway in terms of deciding the mix across various capitalization categories, the multi-cap fund has to adhere to strict definitions of minimum investment up to a certain threshold in large caps, mid-caps, and small caps.

The fund manager for the Canara Robeco Multi-Cap Fund will be Shridatta Bhandwaldar who has done BE-Mechanical and MMS (Finance). Prior to joining Canara Robeco, he has worked with SBI Pensions Fund, Heritage India Advisory, MF Global and Motilal Oswal Securities Ltd. Vishal Mishra will be a co-manager to this fund. He is a chartered accountant with over 10-year experience in the Indian capital markets.

The NFO of Canara Robeco Multi-Cap Fund opens on 07-July-2023 and closes for subscription on 21-July 2023. It is an open ended fund so the fund will be available for NAV related fund purchase and redemption on a regular basis once the NFO allocation is completed. Being an equity oriented multi-cap fund, it is high on the risk scale as there is the risk of equities as well as of a combination of smaller stocks. The fund will be classified as a multi-cap fund for the purpose of AMFI classification.

The Canara Robeco Multi-Cap Fund will offer growth and IDCW (income distribution cum capital withdrawal) options to the investors. In addition, investors can either opt for the regular plan or the Direct Plan, which has a relatively lower expense ratio as they are exempted the marketing expenses allocation. As is the norm, there is no entry load in the fund but an exit load of 1% will be levied if the fund is redeemed or switched out before a period of 365 days from the date of purchase. The minimum investment in the fund is ₹5,000 and the performance of the fund will be benchmarked to the Nifty 500 Multi-Cap 50:25:25 TRI index. Here TRI refers to the total returns index, which is more representative as it factors dividend, apart from the price based returns.

3. DSP Nifty IT ETF

The DSP Nifty IT ETF comes from the house of DSP Mutual Fund, one of the early pioneers in the mutual fund space and also one of the oldest and most respected groups in the capital markets in India. In the past, the fund had joint venture collaborations with Merrill Lynch and Blackrock, but has now ventured on its own.

The DSP Nifty IT ETF is a passive fund in the sense that its intent is not to outperform the index but just to replicate or mirror the IT index. The DSP Nifty IT ETF seeks to provide returns that, before expenses, correspond to the total return of the underlying index (Nifty IT TRI), subject to tracking errors. Like any index fund or index ETF, the DSP Nifty IT ETF will also try to mirror the underlying index and will focus on reducing the tracking error to the bare minimum. Being a passive fund, the attempt here will not be to outperform the index. A small portion of the fund would also be allocated to debt and money market instruments. The fund will be managed by Anil Ghelani and Dilipesh Shah with a substantial focus on keeping the tracking error under check.

The NFO of DSP Nifty IT ETF opens on 21-June-2023 and closes for subscription on 03-July 2023. It is an open ended fund so the fund will be available for NAV related fund purchase and redemption on a regular basis once the NFO allocation is completed. Being an ETF, it would also be listed and available for real time trading at NAV linked prices. The IT index has corrected sharply, so this looks more like a strategic bet on the bounce in the IT index. That would be the risk inherent in the index and the price risk becomes the risk for the fund strategy too. The bet is that the risk-reward is favourable in IT sector.

The DSP Nifty IT ETF will offer only the growth option and not the IDCW (income distribution cum capital withdrawal) options to investors, which is logical considering its unique nature as an ETF. Being an ETF, the cost, or the total expense ratio (TER) will be automatically much lower than other active funds. Since the ETF would also be listed, the question of exit load does not arise. In terms of risk classification, it would be ranked as a high risk investment. The minimum investment in the fund is ₹5,000 and the performance of the fund will be benchmarked to the Nifty IT TRI index.