Should you Invest in IDFC Equity Opportunity Series 1 NFO?

IDFC Mutual Fund has come with a New Fund Offer (NFO) – IDFC Equity Opportunity Series 1. This is a closed ended fund which would mature in 3 Years (on April 14, 2016).

IDFC Equity Opportunity Series 1 – Features:

• A 3 year close-ended equity fund. The fund would be redeemed on April 14, 2016
• One time investment (No SIP/ STPs)
• Minimum amount of Rs 5,000 with a dividend pay-out option
• NFO is open for just 2 days – 9th and 10th April, 2013

IDFC Equity Opportunity Series 1 Theme:

The IDFC Equity Opportunity Series 1 aims to generate capital gains by investing in small companies, which are beyond the top 200-250 companies listed by market capitalization.

IDFC Mutual Fund is of the opinion that the market has bottomed out (as it was in 2003) and hence it’s a good opportunity to invest in small and mid cap companies, which would bounce back faster as the overall market sentiment improves.

Fund Manager:

The fund would be managed by Kenneth Andrade who is head of Investments at IDFC Mutual Funds. He also manages IDFC Premier Equity Fund, which is one of the best performers in mid-cap space. But there are some other funds too like IDFC Infrastructure Fund, IDFC Equity which is managed by him and are average performers.

Risk and Returns:

The IDFC Equity Opportunity Series 1 is a high risk, high return theme. If the timing gets right as the fund manager thinks, you would be laughing all the way to the bank after three years. But as happens with most small cap funds, there is also possibility of making big losses. Remember that since it is an equity fund, there is no concept of a fixed return even after a lock-in of three years.

How to Invest?

In case you are an existing investor in IDFC Mutual Fund, you can invest online through IDFC Website. The advantage is your investment would be considered as “Direct” Investment and so would gain slightly.

You can also invest online through demat account or other websites offering Mutual fund investments. In this case the investment would not be “Direct”.

One more way is to download the form from IDFC MF website and submit it to their office or their registrar’s office physically.

Also Read: How to Invest Direct in Mutual Funds?

Why You Should Invest?

1. The NFO is suited for you, if you have high risk tolerance.
2. The fund manager has shown outstanding performance in IDFC Premier Equity Fund, which has similar theme to the present NFO.

Why You Should not Invest?

1. As stated above IDFC Equity Opportunity Series 1 is a high risk, high return fund scheme. So don’t go for it if you are not a high risk taker.
2. The other point to keep in mind is its closed ended nature, which means you would not be able to exit the scheme mid-way through fund house. The scheme would be listed on Stock exchanges and you can sell there to exit. But the liquidity for closed ended schemes is low and you might have to sell the fund below NAV.

Conclusion:

Invest only if you have money which you can put in high risk, high return investment for 3 years. If not you would do good to stick with your SIP in any well rated mid/small cap scheme.