Tuesday, January 25 2022


While the adage “the higher the risk, the higher the returns” applies to investments in mutual funds, it is often advisable to assess risk tolerance to avoid accidents.

But there could be a way out if investors take a calculated risk in their satellite portfolio – additional positions added to the portfolio in the form of actively managed investments – and not in the core basket.

Radhika Gupta, CEO of Edelweiss Asset Management, shared a similar opinion when she spoke about the conversion of the fund house’s closed-end closed-end opportunities fund into an open-ended “Recently Listed IPO Fund”, which would invest in 100 recently listed companies or first upcoming public offerings.

The fund was launched in February 2018 and is nearing maturity on June 28, 2021. It generated a return of 14.3% compared to 11.2% for Nifty 500.

The IPO fund, according to Gupta, allows for anchor investment options and focuses on new era companies, helping investors gain concentrated exposure to the right issues. “[But] it is not a basic wallet. It’s my fund, but I’ll never say it’s a core portfolio fund. It’s a satellite or thematic idea, ”she said in BloombergQuint’s weekly special. The Mutual Fund Show.

Shalini Dhawan, director and co-founder of Plan Ahead Wealth Advisors, would also recommend the fund as part of a satellite portfolio, but suggested investors weigh its risks as well.

One of the concerns, according to Dhawan, is that not all IPO stocks are worth investing. “It’s about how this IPO plays out and there could be a case where a mid-cap stock becomes a small-cap stock, or a small-cap becomes a micro, and as an investor, you don’t have much to say except to get out of this program. , if necessary.

Another risk, she said, is what would happen when IPOs dry up or in a bearish scenario when there aren’t too many choices to analyze IPOs to make.

Caution note

Dhawan advised investors not to be seduced by promises of return “too good to be true”.

Citing the example of the SBI Special Situations Fund, which according to a circulating text message claims to promise returns of 13-14%, Dhawan said that while the fund has delivered decent returns so far, it is suitable for sophisticated people. or very high net worth having a high risk appetite and does not replace term deposits in the portfolio.

Investors, she said, should understand this as a very risky investment as it seeks to invest in unlisted high yield debt securities.



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