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Mirae Asset Midcap Fund NFO is open now: Should you invest in it?

Amitava Chakrabarty
mutual funds, MF, equity mutual fund, equity MFs, midcap fund, Mirae Asset Mutual Fund, Mirae Asset Midcap Fund, minimum investment, exit load, NFO, lump sum investment, SIP

Mirae Asset Mutual Fund has launched it’s new fund offer (NFO) for the Mirae Asset Midcap Fund, which is an open ended equity scheme that aims to invest predominantly in midcap stocks (companies between 101-250 in market capitalisation), while it has some flexibility to invest across large caps and small caps (upto a max of 35 per cent) and across sectors.

Opened on July 8, the NFO will close on July 22, 2019, but the units of the fund will be available for continuous sale and repurchase from July 30, 2019. The benchmark of the scheme will be Nifty Midcap 100 Index.

Both regular and direct plans of the scheme will be available with growth and dividend options and sub options of dividend reinvestment and dividend payout.

While the minimum investment amount for lump sum investment is Rs 5,000 and multiple of Re 1 thereafter, for monthly/quarterly SIP, the minimum amount is Rs 1,000 and multiple of Re 1 thereafter.

Although there will be no entry load, 1 per cent exit load will be charged only if redemption is made withing 1 year (365 days) from the date of allotment of the units.

Speaking on the launch, Swarup Mohanty, CEO, Mirae Asset MF said, "Mirae Asset MF is enhancing its product basket to provide varied investment solutions for its investors and partners. We believe that mid cap segment provides a decent entry point for investors, as midcap stocks are now trading at close to 20 per cent discount to large caps. We believe investors with a 3-5 year view should be looking at diversifying its portfolio in a midcap fund."

Ankit Jain, who manages Mirae Asset Great Consumer Fund (Thematic Fund-An open-ended equity scheme following consumption theme), will also manage the Midcap Fund, the aim of which is to build a diversified portfolio of strong growth companies, reflecting our most attractive investment ideas as well as to avoid concentration and liquidity risks.

The investment objective of the scheme is to provide long-term capital appreciation from a portfolio investing predominantly in Indian equity and equity related securities of midcap companies. From time to time, the fund manager may also participate in other Indian equities and equity related securities for optimal portfolio construction. However, there is no assurance that the investment objective of the scheme will be realised.

The risk profile of the fund will be high as 65-100 per cent of the investments would be made in high-risk equities and equity related securities of midcap companies, while investments in other equities, equity related securities and money market instruments / debt securities, Instruments and/or units of debt/liquid schemes of domestic mutual
funds would vary from 0 to 35 per cent.

The fund will try to minimise the concentration risk by spreading it through investments in large number of companies so as to maintain optimum diversification and keep stock-specific concentration risk relatively low, while the liquidity risks would be managed by investing in liquid stocks and by trying to maintain a proper asset-liability match to ensure redemption / Maturity payments are made on time and not affected by illiquidity of the underlying stocks.

This scheme would be suitable for investors, who are seeking to generate long-term capital appreciation or income through investments in equities and equity-oriented securities of midcap companies.

Although, stocks in midcap and smallcap segments are under performing for quite some time in both BSE and NSE, but the upcoming first quarter earnings for the year 2019-20 would indicate if they are really cheap and prospective.

To invest in midcap stocks, fund managers take bottom up approach to make value investing in growth oriented businesses. So, it requires adequate skill, expertise and experience to identify the prospective companies having potential of high growth and errors in judgement may result into capital loss in case a company identified for investment fails to perform and perishes. Moreover, it takes time for prospective companies to perform according their growth potential.

Although keeping good midcap funds in portfolio boosts its return prospective, but it involves risks and investors need to devote time to realise the gains.

So, investors having high risk appetite may invest their long-term money in this fund after consultation with their financial advisors.