IDBI Mutual Fund’s healthcare fund will open from February 8th for subscription and will close on February 22nd. The fund intends to achieve long term capital appreciation by predominantly investing in equity and equity related instruments of companies engaged in healthcare and allied sectors.
Being a sectoral scheme, uncertainties related to health and allied sectors would have significant impact on this fund. Uma Venkatraman would be managing this fund. She has over 15 years of experience in financial services industry and she is managing several other equity funds with IDBI Mutual Fund.
It may be a wise strategy to launch a fund in a space when it’s reeling under pressure. Healthcare as a sector is yet to come off its downturn which started three to four years ago.
Asset Allocation & Investment Pattern
|Equity & Equity related
instruments of companies
engaged in Healthcare
and Allied sectors
|Equity and Equity related
instruments of companies
engaged in other than
Healthcare and Allied
|Debt and Money Market
Mutual Fund Liquid
|0%||20%||Low to Medium|
|Units issued by Real
Estate Investment Trusts
(REITs) & Infrastructure
Investment Trusts (InvITs)
|0%||10%||Medium to high|
Owing to restricted and high allocation to health and allied sector the scheme will have less diversification in terms of stock allocation. This scheme will exhibit high volatility. Fund manager will seek to generate alpha by superior stock selection and removing market risks by selling appropriate index. For example, one can seek to generate positive alpha by buying a bank stock and selling Bank Nifty future.
The fund will be benchmarked against S&P BSE Healthcare Index – TRI which has delivered CAGR returns of -4.75% over a three-year period & 6.40% over a five-year period. As per Value Research, this fund would be categorised in Equity: Sectoral-Pharma category which is the worst performing category over a 3-year period delivering CAGR returns of -2.72%.
In June 2018, Mirae Asset Mutual Fund had launched an NFO in healthcare space, named Mirae Asset Healthcare Fund. The scheme’s NAV currently is 10.46, which is an absolute appreciation of 0.46% in seven months. The sector got affected by the troubles at Sun Pharma, which accounts for about 10% of Mirae Healthcare Fund’s holdings.
Here we look at how the peers have done.
|Fund||1-Month Return||3-Month Return||1-Year Return||3-Year Return||5-Year Return||10-Year Return|
|DSP Healthcare Fund – Regular Plan||0.39||–||–||–||–||–|
|ICICI Prudential Pharma Healthcare And Diagnostics (P.H.D) Fund||-0.41||-2.58||–||–||–||–|
|Mirae Asset Healthcare Fund – Regular Plan||2.28||0.62||–||–||–||–|
|Reliance Pharma Fund||4.01||0.97||11.2||3.44||12.44||24.32|
|SBI Healthcare Opportunities Fund||0.68||-1.54||-2.72||-5.44||8.43||20.92|
|Tata India Pharma & HealthCare Fund – Regular Plan||2.25||0.05||2.67||-4.01||–||–|
|UTI Healthcare Fund – Regular Plan||1.19||-0.14||-2.73||-2.73||6.89||17.26|
The fund is taxed as an equity scheme. Accordingly, the short-term capital gains applicable for holding period of less than one year are taxed at 15%, and long-term capital gains (for more than Rs 1 lakh in a year), which is applicable for holding period of above 1 year, are taxed at 10% (plus applicable surcharges and cess).
Key product features of IDBI healthcare
|Parameter||IDBI Healthcare Fund|
|NFO Period||08 February, 2019 to 22 February, 2019|
|Type of Scheme||An open-ended equity scheme investing in
Healthcare and Allied sectors
|Benchmark||S&P BSE Healthcare – Total Return Index (TRI)|
|Min Application Amount||Rs 5,000 and in multiples of Re. 1/- thereafter.|
|Plans and options||Regular & Direct Plans Under which following Options are offered
-Dividend (Payout, Reinvestment & Sweep)
|Exit Load||Exit load (Repurchase/Switch-out/Transfer/SWP) – 1%
for exit within 12 months from the date of allotment for the subscriptions received during the NFO period
|Risk Profile||Moderately High Risk|
|Investor Suitability||This product is suitable for investors who are seeking|
|• long term capital appreciation
•investment predominantly in equity and
equity related instruments of companies engaged in Healthcare & Allied Sectors
The category as well as the benchmark have given negative returns even on a 3-year period. Many experts believe that worst is over for this sector and over long-term period this sector will emerge as a best performing one. From retail investors’ point of view, we would not recommend heavy investments towards this sector or this fund category. Therefore, those investors who have high risk appetite and are already familiar with equity investments can look at this fund from diversification perspective.