Let us do a quick review of new fund getting launched soon – Mirae Asset Banking and Financial Services Fund NFO. Let us see if you or who should invest in this fund at this time. I will try to keep it short. You must have already seen details in other reviews (Google does not rank me on top :)).
So I am assuming you know basic details like minimum amount, opening dates etc. If not, you can check out Mirae presentation video below.
Disclaimer : Needless to state that this review is my personal opinion and you should either consult your Investment Advisor or do your own research before taking any decision.
Now let us get down to business.
Sectorial funds be it Banking, Technology or Pharma, are considered high risk funds. This is because entire investment is in a single sector.
Any change in government policy, international laws, currency valuation changes, interest rate etc. could impact all companies in fund portfolio. Positive initiatives will reward them and adverse actions may punish them all – in a single stroke.
So its high risk – high reward type of fund.
Is Mirae Asset Banking and Financial Services Fund poised to give better returns?
Better returns with higher risk?
Let us see how much more returns you can get for taking this additional risk. Let us see some historical data.
Look at returns for banking and financial sector funds vs more diversified multicap fund category. These are rolling returns of these two categories over 10 year period.
Overall, banking and financial sector funds have outperformed diversified funds in most of the parameters – be it average or median or maximum returns.
Also if you look at returns consistency, multicap category has given more than 12% returns only 9% time and more than 15% returns less than 1% time. This is for all 10 years rolling periods starting 2005.
Banking Sector funds however has given more than 12% almost 43% time and more than 15% for around 12% time.
So overall funds in this sector has beaten more diversified funds. So should you invest in Mirae Asset Banking and Financial Services Fund NFO and get better returns?
First and foremost, ask yourself if you are okay to invest in a fund that invests only in banking and financial service sector. Almost all the companies in portfolio of Mirae Asset Banking and Financial Services Fund will be either banks, NBFCs, Insurance companies, payment banks or other supporting financial sector companies. No Reliance, L&T or Pfizers here.
If this sector does well, you will be rewarded very well and vice versa. For common retail investor, a diversified fund is much safer bet. But if you are bullish on banking and financial service sector, then this could give you that extra 2-3% returns.
Else you can skip it at this stage itself and stop reading further. Otherwise read on.
Do check out your Risk Profile
Any sector fund could be volatile in short to medium term. With COVID-19 situation, banking sector may also go through difficult patch in near term. Impact of lock downs on businesses will also impact their loan repayments. That will directly impact NPAs of banks and NBFCs.
So you should be ready for possible issues for two three years. Does your risk profile in line with such situation or you may panic. That is critical question to answer.
Many times we invest in a fund knowing risks. We feel we can handle volatility but later lose on patience and exit with loss. So do check your risk profile well before venturing into these type of funds.
In long run, this sector should return back to its original form and may outperform more diversified funds.
Conclusion – Should you invest in Mirae Asset Banking and Financial Services Fund NFO?
My personal opinion is NO (at this time).
First and foremost, a very common reason that you will see in my most NFO (New Fund Offer) reviews. I don’t think it makes sense to invest in new fund which does not have a unique investment philosophy separating it from others. If its following similar pattern, then why not go with tried and tested ones.
Secondly, current situation is more apt for allowing Fund Manager to take call on sectors. So we are better off with a diversified fund in current situation.
Lastly, I am neutral on Fund Manager for Mirae Asset Banking and Financial Services Fund. Harshad Borawake who has been managing Mirae Asset Large Cap fund (since 2017) has given returns in last 3 years line with category average. Not a spectacular out performer to invest in new fund based on his skills or reputation.
So even if you are bullish on banking and financial sector, there are enough existing funds available in this category – like one from SBI or ICICI are descent performers. You can check out entire list of funds in this Banking and Financial Services Sector and chose one of them.
Let Mirae Asset Banking and Financial Services Fund establish for few years after which we can invest in it. If Fund Managers prove that they are better than others, you can consider it then but not now.
Also suggest to consult your advisor and check your risk profile before venturing into sectorial funds. In general, avoid taking large exposure to these type of concentrated funds. My personal opinion is that they are good for upto 10% of your overall mutual fund portfolio. Just to add that little extra returns to more diversified portfolio.
Some other facts about Mirae Asset Banking and Financial Services Fund NFO as below.
Link to Mirae Banking and Financial Services Fund Scheme Information Document or SID for your own research and comments.
That’s all with Mirae Banking and Financial Services Fund Review. Happy reading & happy investing.