NFO Review: SBI Innovative Opportunities Fund: SBI Innovative Opportunities Fund is a thematic fund. As its name suggests, this fund will invest in companies that are at the forefront of innovation. Public subscription in this new thematic fund of SBI Mutual Fund opened on July 29 and will remain open till August 12, 2024. But should common investors invest in this fund? To know the answer to this question, it is important to understand the features of SBI Innovative Opportunities Fund.
What is special about SBI Innovative Opportunities Fund
This thematic fund of SBI Mutual Fund will focus on companies that focus on the following three sectors:
1. Product or service innovators,
2. Process innovators and
3. Innovative adoption.
Simply put, the fund will look for companies that:
- Invests a significant portion of its revenue in research and development (R&D).
- Adopts practices that reduce costs and increase efficiency.
- Shows speed in adopting new technologies or business models.
Currently, the fund has an investment universe of around 100 stocks, but aims to build a portfolio of around 35-40 stocks, which will be selected under a bottom-up selection framework.
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How have innovation-based funds performed?
There are currently about 10 innovation-based mutual funds in the country. But being new, the 5-year track record of any of these funds is not available. In fact, half of these were launched only last year. Therefore, not much information is available about how effective the theme of innovation-based funds will be in the long run. Talking about short-term performance, out of the 5 innovation-based mutual funds that have a one-year track record, only one has beaten the return of 39.28% of its benchmark Nifty 500 TRI. And the name of this scheme is ICICI Prudential Innovation Fund.
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Who are the managers of SBI Innovative Opportunities Fund
SBI Innovative Opportunities Fund will be managed by Prasad Padala and Pradeep Kesavan. Prasad has worked as an equity analyst in the same fund house from September 2017 to August 2023 and then handled equity research as an external consultant from August 2023 to February 2024. He has done MBA from IIM Ahmedabad and B.Tech from IIT Madras. He is also a charter holder of the CFA Institute of America. At the same time, Kesavan has 18 years of experience in the financial services sector and he joined this fund house in July 2021.
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Should you invest?
Although the stated objective of innovation funds is to invest in companies that are at the forefront of technology, the top holdings of existing such funds include well-known companies such as ICICI Bank, Info Edge, Zomato, and Infosys. All of these are among the leading companies in the country, in which diversified funds such as flexi-cap and multi-cap funds also invest. It can also be said that the performance of diversified funds like flexi-cap and multi-cap It has been more stable over a long period of time than thematic and sectoral funds. Apart from this, innovation funds are still new, whose performance has not been tested during the 5-7 year market cycle. In such a situation, it remains to be seen how they perform during the market boom and bust. For these reasons, investing in thematic funds can be a bit more risky for new investors. Despite this, if you want to invest in the theme of innovation, then you can consider investing 5-7 percent or even less of your portfolio in it. This is an equity mutual fund, in which market risk always remains. Therefore, take any investment decision according to your risk profile.