NFO – Kotak Pioneer Fund – Should you invest ?

“Future belongs to those who pioneer it” 

Kotak Mutual Fund has launched a NFO, which would invest in companies which work towards innovative products, services or business models to create value, which may give your investment an opportunity for better growth.

“Pioneer” Concept for the Fund

• Concept is that companies fostering pioneering innovations challenge the business status quo
• The Pioneering initiative of such companies creates competitive advantage which proves to be difficult
  for the competitors to surmount, meet or replicate.
• The fund seeks to invest in such companies, that utilize technological and/or procedural ability to
  operate and create large value for customers, government & society as a whole.

Fund Structure

• 80-100% in pioneering innovations theme
• Upto 20% in other than pioneering innovations theme
• Focus on growth oriented / High impact companies Access

Access to Global Ideas

Up to 35% may be invested in overseas funds/ETFs/securities investing in similar theme access to global techs

 

Why should you invest ?

• India is rising in the Global Innovation Index Ranking. India is ranked 52nd in GII Ranking 2019, jumped 5 places in a year and 29 places in last 5 years. The rise in GII ranking of India stands out and reflects deliberate policy action to promote innovation. India also stands out in the the world’s top science and technology clusters, with Bengaluru, Mumbai and New Delhi featuring among the global top 100 clusters
• Companies in theme generally have proven track record of multiple revenue Streams
• Companies in this theme generally tend to have low debt exposure, leaving them less vulnerable to financial leverage issues or interest rate cycles
• The fund provides diversification across geographies as well

Risks to the Investment approach

• The theme is very challenging and the selection of the companies would be the key factor for the success of the fund
• Business typically faster growing companies, come with market ascribing higher valuation multiples in
  cognizance of the growth.
• “Pioneering Innovations” focused approach typically has high representation to emerging technologies and
  correspondingly lower representation to companies that operate in old economy sectors like metals, thermal power, corporate banking, traditional FMCG, traditional IT Services etc.

Recommendation

The fund has an innovative – out of box theme, worth considering. An Investor can Invest max. 5-10% of his portfolio with a time horizon of 5 year plus.