Sundaram Mutual fund recently announced the launch of its new open flexi cap equity scheme called Sundaram Flexi Cap Fund. The fund aims to gain exposure to different sectors by investing in large, mid and small-cap stocks. The fund will not have any restrictions on allocation across different market capitalisations. The NFO opened for subscription on 16 August, 2022 and will close on August 30th, 2022.
Investment objective of the fund
The scheme’s objective is to generate a capital appreciation of a dynamic portfolio that will invest in a mix of equity and equity-related instruments. The scheme will invest across different market capitalization without any defined limit on each market cap category. It will adopt a unique sector-selection and stock-selection approach and focus on investing in a mix of 55-70 stocks at any point. The idea is to maximise returns by gaining exposure across different sectors and company sizes.
Why should you apply for the NFO?
Diversified exposure: By investing in this flexi cap fund, investors can gain access to a diversified portfolio across different market capitalisations. A diversified equity portfolio can provide an edge in fetching higher long-term returns through broader equity market movements.
Balanced risk-return: With a broader equity exposure via this flexi cap fund, investors can gain exposure to various sectors and companies. Thus, such portfolios enjoy a good combination of equities, some of which can offer moderate returns in the short run and it can offer higher long-term returns. The diversified portfolio also allows reasonable protection against higher market volatility.
Access to market opportunities: This flexi cap fund will dynamically invest across securities of different market capitalisations and sectors. Thus, investors can enjoy the benefit of moving across market opportunities that are available across market cap segments.
Inflation beating returns: Equity investments tend to have the potential of fetching inflation-beating returns in the long run. Since this fund will primarily invest in equity, investors can enjoy higher chances of earning inflation-beating returns.
Flexi-cap equity performance : In the table below, investors can look at the comparative performance of flexi-cap funds vs large-cap and mid-cap funds:
| Performance Comparison of Flexi cap funds vs large cap vs large & mid cap | |||||
| 2021 | 2020 | 2019 | 2017 | 2016 | |
| Flexicap funds | 35% | 16% | 12% | 36% | 4% |
| Large Cap Equity Fund | 30% | 15% | 13% | 32% | 4% |
| Large & Midcap Equity Fund | 40% | 16% | 9% | 41% | 6% |
Risks associated with NFOs
Since there is no historical performance track record of NFOs, investors must be cautious before making an investment in these. It is wise to consider factors such as personal risk appetite, investment goals, current size of assets under management of the fund house, fund manager’s reputation, etc. before investing in NFOs.
Source –
Fund details
| Scheme name | NFO details for Sundaram Flexi Cap Fund |
| Type of Scheme | An open-ended dynamic equity scheme investing across largecap, midcap and smallcap stocks. |
| Category of the scheme | Flexi-cap equity fund |
| Benchmark | Tier I : Nifty 500 TRITier II: Nifty 500 TRI |
| Plan options | RegularDirect growth |
| Fund Manager | Mr. Sudhir Kedia & Mr. Ravi Gopalakrishnan |
| Exit Load | If redeemed/switched within 1 year from the allotment – Up to 25% of the units: NilMore than 25% of the units: 1%If redeemed/switched after 1 year from the allotment – NIL |
| Minimum Investment | Regular and Direct Plan: Rs. 100 and multiples of 1 thereafter. |
| Expense Ratio | Unknown |
| NFO Period | 16 Aug 2022 – 30 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.
