Invesco Mutual Fund has filed papers for Invesco Equity Savings Fund. An equity savings fund uses derivatives to reduce net equity allocation while maintaining gross equity allocation above 65%. This allows the fund to enjoy a favourable tax status as an equity fund without taking on the risk associated with an equity fund. The filing comes at a time when Indian markets have been correcting sharply due to concerns over the rupee and the financials sector, particularly NBFCs.
Invesco Mutual Fund, a fund management company headquartered in Atlanta, Georgia (USA), first entered India in 2012 by acquiring a stake in Religare AMC. The joint venture was called Religare Invesco. In 2016, it acquired Religare’s remaining stake in the joint venture and the fund house was renamed ‘Invesco Mutual Fund.’ The AMC is known for its Invesco Contra Fund and its Growth, Dynamic Equity and Mid-and-Small Cap Funds.
Invesco Equity Savings Fund will have a gross equity allocation of 65-90%. Part of this holding will be hedged away using derivatives to bring Invesco Equity Savings Fund’s equity allocation into the 15-40% range. Invesco Equity Savings Fund will also have a gross debt allocation of 10-35%. The debt allocation may include securitised debt up to 35% of the net assets of the scheme.
Taher Badshah and Amit Ganatra, who manage the popular Invesco Contra Fund, will be the fund managers of this scheme. Invesco Contra Fund has delivered returns of 24.6% CAGR over the past five years. You can read our interview with Amit Ganatra, here.
Invesco Equity Savings Fund will be benchmarked against the Nifty Equity Savings Index. The index had one year returns of 8.25% and five year returns of 9.98% (CAGR) as of 30th June, 2018. The minimum investment amount will be Rs 5,000. Investors will be offered the growth, dividend payout and dividend reinvestment options.
Invesco is a highly respected fund house but this fund will be fresh and have no established track record. That said, if equity markets keep correcting, equity savings funds may outperform as their lower gross equity exposure lowers the hit they have to take on their balance sheets. In either case, proceed with caution.
This article is for informational purposes only. Please take the advice of your financial planner before you make the decision to purchase.