IDFC Mutual Fund announced the launch of IDFC Midcap Fund NFO. This is an open-ended equity scheme that will aim to generate long-term capital appreciation through investment focus on equities and equity-linked securities in the midcap segment. The New Fund Offer will open for subscription on July 28, 2022, and close on August 11, 2022.
Investment objective of the fund
The fund will explore opportunities in the mid-cap segment by investing a minimum of 65% of its corpus in mid-cap stocks. The remaining corpus will be invested as per market conditions and as per the fund manager’s views. The fund will focus on identifying high-quality mid-cap stocks that offer better growth prospects, have robust corporate management and a good risk-reward balance from a mid to long-term perspective.
Why should you apply for the NFO?
Mid-cap exposure: Through investment in mid-cap stocks, investors can fetch capital growth benefits as these can be potential future leaders in their industry segment. Such investments can have higher chances of significant long-term gains if investors are willing to adopt the high-risk and high-return investment strategy.
Broader sectoral exposure: Since this fund will invest in a variety of mid-cap stocks, investors can get access to various sectors and multiple future profit opportunities from them. This also aids diversification.
Discounted access: Since the mid-cap equity segment is currently trading at a discount to its long-term average, investors can get more fund units with lower capital. This also increases the chances of higher long-term gains.
Strategic investment: The fund will adopt a strategic investment approach by focusing on companies with high-quality management, companies that have better scalability, and companies that have a competitive market position. All these factors can aid the chances of positive long-term returns.
Mid-cap equity performance : In the table below, investors can look at the comparative performance of mid-cap stocks vs large-cap and small-cap stocks:
| Category | Mean Return (%) | Standard Deviation (%) | Sharpe Ratio |
| Mid-cap | 20.94 | 25.28 | 0.69 |
| Large-cap | 13.68 | 21.84 | 0.47 |
| Small-cap | 20.39 | 30.54 | 0.55 |
Source – NFO document shared by team
Fund details
| Scheme name | NFO details for IDFC Mid Cap Fund |
| Type of Scheme | An open-ended equity scheme predominantly investing in midcap stocks. |
| Category of the scheme | Mid-cap equity fund |
| Benchmark | S&P BSE 150 MIDCAP INDEX |
| Plan options | Regular Plan Direct Plan Both plans will have growth and IDCW options. |
| Fund Manager | Mr Sachin Relekar, Mr. Harshal Joshi |
| Exit Load | If redeemed/switched within 1 year from allotment – 1% of NAVIf redeemed/switched after 1 year from allotment – NIL |
| Minimum Investment | Rs. 5,000 and in multiples of Re. 1 thereafter |
| Expense Ratio | Unknown |
| NFO Period | 28 July 2022 – 11 August 2022 |
Where can you invest in the NFO?
Head over to the Fisdom App to invest in this NFO.
FAQs
NFO (New Fund Offer) is launched by the Asset Management Companies (AMCs) to generate funds for launching a new mutual fund. These funds are then pooled to buy the shares or other securities as per the fund’s mandate or the guidelines based on which the fund is launched. NFOs are like IPOs where all the relevant details of the funds are provided at the time of their launch and the units of the fund are usually set at Rs. 10 per unit for a subscription. SEBI guidelines allow the NFOs to be active for a maximum period of 30 days following which the units of the fund are traded based on their daily NAV.
NFOs, at the time of their launch, are launched in two categories namely close-ended funds and open-ended funds. The details of each type of fund are mentioned below.
Open-ended funds
The majority of mutual funds are launched as open-ended funds. Investors can subscribe to the fund at the nominal rate (usually Rs. 10 per unit) during the NFO period. After the NFO period, when the units are traded based on the daily NAV, the investors stand to gain huge capital gains depending on the performance of the fund.
Close-ended funds
Close-ended funds, on the other hand, do not allow the investors to subscribe to the fund after the NFO period is closed.
Investing in NFOs is a very good opportunity to maximize the returns as the units can be subscribed at nominal rates and the returns are potentially higher based on the prevailing NAV at the time of redemption. However, there are several points that need to be considered while subscribing to an NFO. Some of such points are highlighted below.
a)Track record of the AMC
NFOs are offered for the new mutual fund so no proven track record can be reviewed by investors to make an informed investment decision. The investors have to therefore rely on the reputation of the AMC and other details mentioned in the NFO to make an investment decision.
b)Expense ratio (if mentioned)
NFOs need a good amount of publicity to make the investors aware of the fund and the investment opportunity. It is therefore essential for the investors to check the expense ratio of the fund and ensure that it does not outweigh the net gains.
c)Check if the fund is in correlation to the existing portfolio
Recently there have been many NFOs in the market that investors can choose from. However, while selecting the fund the investors must check if the fund is not similar to an existing fund in their portfolio. For example, if the fund is a large-cap fund and the investor already has one or two similar funds in their portfolio, investing in another will not add much value to the net returns or the diversification of the portfolio. On the other hand, many NFOs can be sector-specific or country-specific. In such a case, investors have to check if the fund is in line with other factors like their risk-return profile and investment goals.
d)Review the SID carefully
Reviewing the SID (Scheme Information Document) is a crucial step that should not be missed by investors while investing in NFOs. It contains all the relevant information about the fund managers, their qualifications, and experience which is crucial for the funds’ performance. Other relevant information includes the investment profile of the fund, target sectors or securities, benchmark index, asset allocation ratio, etc. This helps the investors understand the returns expectation of the fund as well as the target investments where the fund will invest the pooled funds. Investors having a risk-return profile in line with that of the fund can thus invest in such funds.
Investment in NFOs can be done through two main routes i.e., the online or offline modes. The details of the same are mentioned below.
a)Online mode
The online mode of investment is suitable for investors already having a Demat account and a trading account. Investors can simply select the NFO and invest by selecting the number of units to invest and paying for the same through online payment modes available on the platform.
b)Offline mode
The offline mode of investment in NFOs is through registered brokers and distributors. Investors can contact their brokers and distributors providing them with the details of the amount to be invested and they can invest in the selected NFOs on their behalf. Investors can make hassle-free investments through such modes as all the necessary forms to be filled and the formalities to be met are looked after by these entities giving investors the benefit of ease of investment. The charges for such services are nominal when compared to the potentially high returns.
