The fund will invest at least 80% of its corpus in equity and equity-related securities of companies that are likely to benefit either directly or indirectly from healthcare and allied sectors. Up to a 20% will be deployed in equity shares of companies other than those in the healthcare sector. It also has the provision to deploy up to 20% in debt and money market instruments.
Pharma as a sector is seen as too restrictive and pharma returns are close to the bottom of all the fund categories over the last three years. It is important to remember that as recently as 2015, the sector was a market darling. That year marked a peak and the following years saw major declines. Valuations were looking stretched and a series of US FDA actions against Indian pharma players triggered declines in pharma stocks. The sector is heavily dependent on exports.
As a result, fund houses are focusing on the broader ‘healthcare sector.’ For instance, SBI Pharma became SBI Healthcare Opportunities Fund and UTI Pharma and Healthcare became UTI Healthcare. Mirae AMC’s new fund, Mirae Healthcare Fund takes a similar ‘broader’ approach.
Vrijesh Kasera who will be one of Mirae Healthcare’s managers says in the AMC’s video that health care includes medicines, hospitals, diagnostics, distribution, medical equipment, medical insurance making it much broader than just a pharma fund.
Kasera further argues that healthcare is a secular theme because health expenditure is not subject to economic cycles. This is true but the sector can be cyclical in terms of market interest and valuations, as had happened in 2015. Also, there is no reason to believe that the spate of US FDA inspections and actions will grind to a halt. On the other hand, the three-year correction in the sector has brought valuations down to more reasonable levels.
The scheme will be an open-ended fund and will be open for subscription on a continuous basis after 3rd July 2018. The fund will invest across market capitalisation and seek to maintain a concentrated portfolio of 30-40 stocks.
It will follow a fundamentals-based, bottom-up approach to stock selection. The fund manager, Vrijesh Kasera worked as a research analyst at Edelweiss for 8 years. He joined Mirae in November 2016. The fund house also lists Mirae AMC’s Chief Investment Officer Neelesh Surana as a manager of the fund. Neelesh manages the flagship Mirae Asset India Equities Fund which has delivered a CAGR of 16% over the past 10 years.
Mirae AMC has a record for delivering on its equity funds. Pharma as a sector has done badly over the past three years and this may well be the bottom. A fund’s broader ‘healthcare’ focus will also reduce risk. However, investors must remember that it is a sector fund at the end of the day and hence carries a high level of risk. Proceed with caution.
NFO Period: 11th June to 26th June
Benchmark: S&P BSE Healthcare Index
Minimum Investment: Rs 5000
Fund Managers: Vrijesh Kasra and Neelesh Surana
Options: Growth, Dividend Payout, Dividend Reinvestment