Categories: Miscellaneous

Invesco India Flexi Cap Fund (NFO)

Invesco Mutual Fund recently launched the NFO for Invesco India Flexi Cap Fund, which is a dynamic equity oriented scheme. This open-ended scheme will primarily invest in large-cap, mid-cap, and small-cap stocks with a special preference for companies that are high growth, high-quality, and demonstrated potential for turnaround. The NFO will be open for subscription from January 24 and close on February 7. The scheme will be jointly managed by Taher Badshah and Amit Nigam.

Investment objective of the fund

Invesco India Flexi Cap Fund will invest in equity and equity related securities belonging to large, mid and small capitalization companies that have a high growth and turnaround potential. It aims to follow a top-down and a bottom-up approach for identifying the right stock investment opportunities from across market capitalizations. This flexi cap fund will adopt a sector neutral strategy and focus on its proprietary stock categorization framework, combined with its investment philosophy for stock selection.

Why should you apply for the NFO?

Diversified exposure: This flexi cap fund offers investors the opportunity to diversify their portfolio as it invests in attractively positioned companies by weighing the risk-reward factors.

It combines different sectors within the same portfolio, allowing investors the benefit of cyclical tailwinds while limiting the impact of different business cycles.

High-quality investments: The scheme invests in companies that expect EPS, revenue growth or operating profit to grow in the range of 15%. It specifically aims for companies that demonstrate the potential of high CAGR in the next 2 years and reflect sustainable high growth potential in the long run. Through this fund, investors can gain exposure to high-quality companies with exhibited ROE of around 15% as per 5-year trend.

Benefits of flexi cap investment: With this flexi cap fund investment, investors can benefit from a diversified portfolio spread across different market caps. This can help in minimizing risk of volatility and maximize portfolio returns in the long run.

Long-term growth: The Invesco India Flexi Cap Fund comes with the required expertise of capturing investment opportunities across large, mid and small-cap stocks. Thus, investors can aim to build long-term wealth through this fund investment.

Comparative performance of market capitalisations: In the table below, investors can go through the comparative historical performance of broader market indices across different market capitalisations. Large cap returns are represented by S&P BSE Sensex TRI, Midcap by S&P BSE Mid Cap TRI and Small Cap by S&P BSE Small Cap TRI.

This will throw light on the benefit of diversification and how it can help fetch consistent returns across different market cycles:

	Large Cap	Mid Cap	Small Cap
2021	23%	41%	64%
2020	17%	21%	33%
2019	16%	-2%	-6%
2018	7%	-12%	-23%
2017	30%	50%	61%
2016	3%	9%	3%

Source: https://invescomutualfund.com/docs/default-source/default-document-library/nfo-invesco-india-flexi-cap-fund-one-pager.pdf?sfvrsn=a8a8ac2_0

Fund details

Scheme name	NFO details for Invesco India Flexi Cap Fund
Type of Scheme	An open-ended scheme with equity-focus across different market capitalizations.
Category of the scheme	Flexi cap
Benchmark	S&P BSE 500 TRI
Plan options	Regular Plan Direct Plan Growth optionIDCW option
Fund Manager	Taher BadshahAmit Nigam
Exit Load	If maximum 10% of the units are redeemed/ switched out within 1 year from the date of allotment – No exit load. If more than 10% of the units are redeemed or switched out within 1 year from the date of allotment – exit load of 1% will be charged. For units redeemed or switched after 1 year from the date of allotment – No exit load.
Minimum Investment	Rs. 1,000 and multiples of Re. 1 thereafter.For SIP investment – Rs. 500 and multiples of Re. 1 thereafter.
Expense Ratio	Not known
NFO Period	24 Jan 2022 – 07 Feb 2022

Where can you invest in the NFO?

Head over to the Fisdom App to invest in this NFO.

1. What is NFO?

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.

2. What are the types of NFOs?

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.
a)Open-ended funds
The majority of mutual funds are launched as open-ended funds. These types of funds allow the investors to enter or exit the fund at any time based on various factors like profit opportunity, goal realization, minimizing losses, etc. the units of the fund, therefore, keep fluctuating based on the demand-supply functions of the market. 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.
b)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. The number of units of the fund is fixed unlike open-ended funds and the fund is for a definite period of time, i.e. with fixed maturity. Investors can exit the fund after the completion of such a period.

Close-ended funds can be listed on recognized stock exchanges to increase their liquidity and can be traded even after the closure of the NFO period. The NAV of the fund is determined based on the demand-supply function of its units.

3. What are the points to consider before investing in NFOs?

. 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)Lack of track record
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)Higher expense ratio
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.

How to invest in NFOs?

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.

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.

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.

Akshatha Sajumon