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New Fund Offers (NFO) Review

In the dynamic world of finance, new investment opportunities continually arise, captivating investors with the allure of growth and returns. One avenue that has gained considerable popularity in recent times is New Fund Offers (NFOs). NFOs provide investors with a unique chance to participate in fresh and thrilling investment ventures right from their inception. Let us review ongoing NFOs.

These offerings bring a sense of exclusivity and the potential for early advantages. Whether you’re an experienced investor aiming to diversify your portfolio or a newcomer eager to explore the realm of investments, understanding the intricacies of NFOs is essential.

Join me as I embark on an exploration of the captivating universe of current NFOs, uncovering their significance, benefits, and key factors to consider that can aid you in making well-informed investment choices.

A common mistake made by many investors is hastily jumping into New Fund Offers (NFOs) with the misconception that they can acquire more units at lower costs. Unfortunately, this belief has led to numerous investors experiencing unnecessary losses in the long term.

Which NFOs are open recently?

Following NFOs or New Fund Offers are open for subscription currently.

  • UTI Balanced Advantage Fund

Some recently closed NFOs below.

  • Kotak Quant Fund
  • Canara Robeco Multi Cap Fund

Let’s do a quick Review of important ongoing NFOs.

UTI Balanced Advantage Fund Review

NFO Open Date: 21 July 2023

NFO closure Date: 04 August 2023

Category: Balanced Advantage Funds / Dynamic Asset Allocation Funds

My short Review

If you are new to concept Balanced Advantage Funds then you can read about Best Balanced Advantage Funds in India first before proceeding with remaining part. In short, these funds adjust asset allocation between Equity and Debt dynamically based on some pre determined formula / strategy. This generally helps them to be less volatile than pure equity funds but even long term returns are less than pure Equity Funds. You pay cost for less volatility. This category suits for people of moderate risk taking apetite.

UTI balanced Advantage Fund plans to have Equity allocation of 30 to 90% and rest in debt. This wide range suggest, it will have liberty of going very low on Equity if its model predicts over valuation.

UTI Balanced Advantage fund model will consider Value based and Yield based parameters to decide the Equity allocation. These are P/E, P/B, Dividend Yield and Dividend Gap.

Model has negative correlation to P/E & P/B. So higher the Price to Earnings and Price to Book ration, lower will be equity allocation. On other hand model will have higher allocation if dividend yield is high. Personally I think it does not make much difference if you consider dividend yield or not. When P/E and P/B are low then dividend yield is of course going to be high. So having it as separate parameter I am not sure how it helps.

On same line, model also considers Yield gap which is difference of Equity Yield and Bond Yield. If gap is high that means Equity Yield is higher than Bond Yield and for that happen P/E has to be low.

So even though UTI MF claims they are considering 4 parameters, in practical terms P/E and P/B ratio are driving formula.

Back tested this model shows it has returned 1 percent less than Nifty but volatility is almost reduced by 30%. So better risk adjusted returns as any other Balanced Advantage Fund would offer. Model’s worse 1 year return in last 8 years is -14% compared to Nifty’s -24%.

My Take:

If investor is of moderate risk category and is okay with little less return compared to pure equity but prefers low volatility, then Balanced Advantage Fund is good category. Investment horizon needs to be minimum 5 years and preferably 7 years or more.

As far as UTI Balanced Advantage Fund is concerned, I would prefer to wait and watch. There is nothing significantly different compared to ICICI Balanced Advantage Fund. So I don’t see any compelling reason to go for a new fund instead of a proven one.

Also asset allocation is just one aspect of mutual fund. Being an actively managed fund, stock selection will pay critical role in overall returns. In that aspect also other funds in Balanced Advantage Funds of other fund houses have shown better results compared to UTI MF.

Click here for presentation of UTI Balanced advantage Fund.

Kotak Quant Fund NFO Review

NFO Open Date: 12 July 2023

NFO closure Date: 26 July 2023

Category: Equity Scheme – Sectoral/ Thematic

My short Review of Kotak Quant Fund NFO

Kotak Quant Fund aims to achieve long-term capital appreciation by utilizing data-driven investing strategies. This open-ended equity scheme combines market data with quantitative models to create an optimized portfolio.

What is Quant fund? This investment fund employs a quantitative analysis approach to select securities based on factors. In case of Qualitative analysis, it is more on Fund Managers skills but in case of Quantitative, it is based on actual data or numbers.

Kotak Quant fund is claiming to make best of both – Fund Manager skills and Quantitative signals.

Fund manager will use human intelligence to come up with around 150 stocks based on his judgement on fundamental and capitalisation. Then Quant model will use signals to shortlist 35-50 stocks to invest.

So which signals they will use. If you refer their presentation then they will use

  • Momentum – Stocks that are showing upward growth in share price
  • Quality – Removing stocks that are not fundamentally strong
  • Volatility – Higher allocation to low volatility stocks

From allocation perspective, mostly it will be Large and Mid cap.

By integrating fundamental insights and behavioural factors, the fund strives to capitalize on long-term growth opportunities. Embrace the innovative approach of data-driven investing and unlock the potential for long-term capital appreciation with Kotak Quant Fund.

The scheme has Harish Krishnan as the equity fund manager, Abhishek Bisen as the debt fund manager, and Arjun Khanna as the dedicated fund manager for foreign securities investments.

My Take:

The concept seems promising as it follows a two-step process, with the Fund Manager shortlisting stocks and then applying a quantitative model. However, there is no concrete evidence that a model based on momentum, quality, and low volatility will outperform purely actively managed funds.

Additionally, the concept of quantitative investing is still not widely mastered, and for many companies, it remains a buzzword that generates investor interest, but few have achieved success.

Furthermore, it’s important to note that this fund does not fall under the flexicap category, as it has a greater focus on large and mid-cap stocks. This means that if there is a rally in small-cap stocks, the fund may miss out on potential gains.

It might be wise to adopt a wait-and-watch approach in this case.

Scheme Information Document:

Click here for Scheme Information Document or SID.

Click here for KIM.


NFO Open Date: 10 Jul3 2023

NFO closure Date: 24 July 2023

Category: Equity Scheme – Sectoral/ Thematic

My short Review of this NFO

The Bandhan Financial Services Fund is an open-ended equity scheme designed to primarily invest in equity and equity-related instruments of companies operating in the financial services sector. That means it will invest most of its money in Banks, Insurance, Capital Markets, Fintechs and financial companies.

This fund carries a higher risk profile, making it suitable only for investors with a long-term investment horizon who can tolerate the potential volatility.

Potential investors who may find this fund appealing include:

  • Those who are bullish on financial services sector
  • Individuals who believe in the long-term growth prospects of the financial services sector, considering the rising demand for financial services in India.
  • Investors seeking a high returns but are also willing to take high risk.

It is important to understand that the financial services sector is cyclical and can experience short-term volatility. Therefore, investing in this fund should only be considered by individuals who are comfortable with the inherent risks and possess a long-term investment outlook.

Fund will take flexicap ( no restrictions on company size while investing) and Growth startegy.

My Take

It’s crucial to note that timing is crucial when investing in sector-specific funds. Seizing opportunities during upward cycles and exiting before downward cycles begin is vital. This makes it unsuitable for common investors who are not really tracking sectors.

Also I did not find any differentiating factor in this new NFO that separates it from existing mutual funds in financial sector. You can check out top funds in financial sector and chose one that has proven track record. If I were you and keen to invest in this sector, then I would have gone with ICICI Banking and Financial Service fund.

Important Documents:

Click here for Product Presentation of BANDHAN FINANCIAL SERVICES FUND NFO.

Click here for Scheme Information Document or SID.

Canara Robeco Multi Cap Fund / NFO Review

NFO Open Date: 7 July 2023

NFO closure Date: 21 July 2023

Category: Equity Scheme – Multi Cap Fund

My short Review of Canara Robeco Multi Cap Fund / NFO

The Canara Robeco Multi Cap Fund allocates a minimum of 25% of its investments to large cap, midcap, and smallcap stocks. The remaining funds are allocated towards debt instruments or units issued by Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). This allocation strategy ensures that the risk is evenly distributed across all market capitalisation while incorporating some debt components to enhance stability in returns, even during unexpected market downturns.

While investing in large cap stocks can provide stable returns, investing in midcap and smallcap stocks can yield high returns over the medium to long term. Consequently, investing in a multicap fund like this can offer cyclical opportunities.

However, it’s important to note that investing in the midcap and smallcap segments of such a fund carries high volatility. Also 25% mandate from SEBI means even if Fund Manager feels say Small Cap market is over valued, it will still need to keep invested in same. Due to this personally I have bias towards Flexicap funds which give more freedom to fund manager.

My Take:

Investors with a high-risk tolerance can consider this scheme for a medium to long-term investment perspective. I generally prefer not to venture into these new funds till they show some performance and have track record to back their claims. There are existing funds within multicap category that one can explore instead.

Scheme Information Document:

Click here for Scheme Information Document or SID.

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