Special Opportunity Funds invest in companies that take advantage of special circumstances, have the potential to give high returns

Special Opportunities Funds :Talking about the mutual fund market, many asset management companies offer special opportunity funds, which very few people know about. The most recent example of this is the Kotak Special Opportunities Fund launched by Kotak Mahindra Asset Management, which is an open-ended equity scheme (Mutual Funds) based on the theme of special situations. The goal of such a scheme is to give high returns to investors by investing in companies that benefit from special situations such as company-specific events, corporate restructuring, changes in government policies and technological disruptions. After all, how do these funds work, what special situations do they keep an eye on and how do investors benefit.

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Special opportunity funds can be extremely valuable to investors as they can spot and take advantage of unexpected changes in the market. These changes may occur due to reasons such as policy, company restructuring, or technological advancements. Adding these funds to an investment portfolio helps in diversification to better manage risk and increase the chances of earning high returns over time.

How do Special Opportunities Funds work?

The fund manager emphasises that special situations require professional analysis to assess the impact of uncertain events and take advantage of them. According to him, a company’s journey can be affected by many events such as policy changes, mergers and acquisitions, industry consolidation, management changes. For example, the cement sector is currently feeling the impact of industry consolidation or the real estate sector is being affected by RERA. Special Opportunities Fund focuses on looking for such special situations.

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1. Company Specific Events

Management Change / M&A / Corporate Restructuring

Unfavorable Macro/Business Cycle

Product changes / discontinuations

2. Industry Specific Events

Disruption due to new entry

Deep competition

Domino effect

3. Regulatory changes

Amendments to the Regulations

Government Reform

Changes in tariffs / taxes

4. Macroeconomic changes

Fluctuations in commodity prices

Dearness

Forex Reserves

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Invest for the long term

Now the question arises, for how long should you invest? If you invest in Special Opportunity Funds, most experts recommend that you should invest in these funds for at least 3-5 years (long term). Many asset management companies in India, such as Kotak Mahindra Asset Management Company Limited, ICICI Prudential AMC, Whiteoak Capital and Samco Securities, are offering Special Opportunity Funds to take advantage of market dynamics.

Kotak Mahindra Asset Management has recently launched Kotak Special Opportunities Fund, an open-ended equity scheme based on the theme of special situations. The fund aims to provide rapid appreciation of investors’ capital over the long term by investing in companies that benefit from various special situations such as company-specific events, corporate restructuring, changes in government policies and technological disruptions. This NFO is open for subscription till June 24, 2024.

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What will be the benefit to the investor?

For investors, Special Opportunities Funds offer a diversification strategy that combines higher risk and reward opportunities. Unlike sectoral funds that focus on a single sector, Special Opportunities Funds are generally diversified across sectors, making them ideal for strategic allocation in an investor’s portfolio. Such schemes can be a valuable addition to an investor’s portfolio, providing exposure to a large range of high-potential investment opportunities.