Invesco India launches Focused 20 Equity Fund - Should you invest?
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Invesco India launches Focused 20 Equity Fund - Should you invest?

Invesco Mutual Fund has come up with its new fund Invesco India Focused 20 Equity Fund, (an open-ended equity scheme investing in maximum 20 stocks

  • September 22, 2020  
  • |  
  • UPDATED   12:28 IST
Invesco India launches Focused 20 Equity Fund - Should you invest?
The minimum investment amount during the NFO is Rs 1000 and in multiples of Rs 1 thereafter

KEY HIGHLIGHTS

  • Diversified Funds have lesser risk but also give muted returns
  • Concentrated stocks have potential to deliver high returns but have higher risk
  • Focused funds invest in few concentrated high-conviction stocks
  • Invesco India Focused 20 Equity Fund intends to invest only in 20 stocks across caps
  • This fund is meant for investors who are looking for higher return and have higher risk appetite
  • Go for this fund only when you are well-versed with equity market and understand the risk of concentrated portfolio
  • If your risk appetite and life goal are aligned you can invest in the fund beyond NFO

When you invest in a large number of stocks from diverse industries the law of averages saves you from ending up with lowest return. However, this strategy also denies you the opportunity to earn high returns from top performing stocks. If you invest only in top performing stocks you can drive home greater returns.

This strategy is known as concentrated portfolio investment which puts money only in few high-conviction stocks. But the problem is how skilled you are in identifying the outperformers at the right time. This is where the role of an expert fund manager comes into play, especially in MF category called Focused Equity Funds.

Invesco Mutual Fund has come up with its new fund Invesco India Focused 20 Equity Fund, an open-ended equity scheme investing in maximum 20 stocks. The multicap fund adopts a high conviction approach to investing while maintaining a balance between conviction and diversification.

"If you analyse the data you will find a handful of stocks have contributed to most of the returns at different points in time. Further, there is also huge divergence in returns across and within the sectors which lays emphasis on the right stock selection. Our investment expertise and research prowess enables us to identify the right investment ideas with the potential of generating wealth and helping investors get closer to their financial objectives," says Saurabh Nanavati, Chief Executive Officer, Invesco Mutual Fund.

The fund currently intends to invest a large portion of the portfolio in large-cap stocks (approx. between 50% - 70%). Its exposure to midcap stocks will be in the range of 30% to 50%, while exposure to small-cap stocks will be in the range 0 - 20% of the portfolio (based on current views and may change from time to time). The portfolio will comprise of both growth and value stocks. The fund will be benchmarked to S&P BSE 500 TRI.

"Over the last 12 years, our thorough research, risk management processes and comprehensive in-house coverage of Indian equities have enabled us to deliver strong and consistent returns across our equity strategies. We are also proud to announce that we have crossed over 10 lakh investor accounts - a reliable testimony of our commitment to the Indian market and faith reposed by retail investors in our equity funds," said Nanavati.

The minimum investment amount during the NFO is Rs 1000 and in multiples of Rs 1 thereafter. For SIP investments, the minimum application amount is Rs 500 and in multiples of Rs 1 thereafter.

No exit load will be charged, if upto 10 percent of the units are redeemed/switched out within 1 year from the date of allotment. If more than 10 percent of the units are redeemed/switched out within 1 year from the date of allotment, exit load of 1 percent will be charged. No exit load will be charged for units redeemed/switched out after 1 year from the date of allotment. The New Fund Offer (NFO) is open for subscription and will close on September 23, 2020.

Should you invest in this fund?

You must do due diligence about the fund house if  you are planning to invest into a new fund that does not have past track record. Invesco India has been there for around 14 years and with AUM of over Rs 23,000 crore as of quarter ending June 2020. Out of 45 schemes that it currently runs, 3 schemes are ranked 1 by CRISIL while 6 schemes are ranked 2 and 5 schemes are ranked 3.

The second factor you must assess is the track record of the fund manager managing this scheme. Taher Badshah, Chief Investment Officer will be managing this fund. He has over 26 years' of experience in the Indian equity markets and is also responsible for the overall equity management function at the firm. Prior to Invesco he was with Motilal Oswal Asset Management where he was the Head of Equities.

This fund also comes at a time when multi-cap fund category, a very popular fund category, is facing regulatory headwinds. The rigid categorisation of multi cap funds has reduced the flexibility of fund managers to change the allocation into different caps as per changing market dynamics. In such a situation the focused fund category gives desired flexibility to fund managers to deploy their strategy without any regulatory hurdle.

Investing in NFO is different from investing in an IPO, and when it comes to NFO the timing hardly plays a decisive role. If you are convinced with the philosophy of the fund and find it right fit to achieve your life goals, then you can start long term investment at any point of time.

If you are new to equity investment you should rather spend some time, and begin with well diversified funds especially large cap funds. However, if you have already spent some time with equities and understand the nuances and are willing to take additional risk for higher return then you can consider focused fund.