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NFO Note: Mirae Asset Focused Fund
April 23, 2019

Our detailed analysis on the upcoming New Fund Offer (NFO) from Mirae Asset Mutual Fund.


Author : iFAST Research Team



"Stay focused and aim to achieve results"

This is the tag line of the New Fund Offer (NFO) from Mirae Asset Mutual Fund, the leading Korean Asset Manager in Asia. The Mirae Asset Focused Fund has been launched today and will close on May 7, 2019. The fund will be managed by Gaurav Misra, who comes with over 23 years of experience in investment management and equity research. Although a new face in mutual fund management, Misra is still a veteran who has been managing huge investor portfolios in one of India's leading wealth and investment management firms, ASK Investment Managers, in the capacity of Senior Portfolio Manager.

Investment Strategy

Mirae Asset Focused Fund will invest into 30 companies across the market capitalisation spectrum. The intention is to identify high conviction stocks through investment ideas that will result in a portfolio of strong growth companies. Additionally, the team at Mirae believes that optimal weight allocation to these chosen stocks will create more wealth for investors in the long run. Thus, the aim is to create a robust portfolio that avoids concentration risk and liquidity risk through the following:

• Adequate sector diversification, with an eye on benchmark weights

• Active and nimble portfolio management

• A cap on the number of stocks, which would mean forced displacement – only the best ideas remain in the portfolio

What is also interesting about this NFO is Mirae's reasoning on why this is the right time for them to launch a fund with a focused approach. They believe that, "Focus and conviction to identify and stay with long term wealth creators with higher allocation usually pays in the long run."

Portfolio Strategy

The fund, as stated, will invest into 30 high conviction ideas and will be actively managed depending upon the future trends that the fund manager identifies in different sectors. As the portfolio will consist of 30 high concentration ideas, it is expected to follow a Buy and Hold Strategy. The fund will focus on high quality companies, many of which may be a part of the chosen benchmark, the Nifty 200 Index.

As per the fund manager, the 30 stocks will be selected based on the following 3 parameters:

Wide/Deep Moats: Businesses that address large market opportunities, have sustainable competitive advantage, and high return ratios

Compounding Growth: Businesses with long term perspective         

Strong Management: A management that shows evidence of strong corporate governance and thought leadership      

Our Take

One of the funds from Mirae Asset Fund House entered our Recommended Funds List for the first time in 2012. The entry of a second fund in 2014 gave us the confidence that the fund management team continues to put up top performance year after year and it will only be a matter of time before their funds start becoming a part of investors' core portfolios.

As the funds from the fund house continued to clear the filters in our model over the years, we had written the following lines to our investors: "If a fund house can prove that they have a proficient fund management team who can deliver consistently across cycles, then no goliaths in the industry can stop them from getting into investor portfolios." The Korean asset manager has firmly set its feet on Indian soil and has not disappointed our investors in the last 7 years. We have also seen Mirae's AUM move up from INR 422 crore in December 2011 to INR 24,191 crore in March 2019.

Strategy-wise, we have been very positive on funds from the focused space and we would like to place our bet on this fund from Mirae Asset Fund House as well. However, we have always believed that funds with focused strategies are also very dependent on the ability of the captain of the ship to scout for the right opportunities, at the right price, and stay invested in spite of short term turbulences. We are of the view that Misra's expertise in focused strategies while handling PMS portfolios will help investors take advantage of high conviction bets that can create wealth for them in the long run. This, along with the extensive research process followed by Mirae across fund categories is also a USP of this fund.

The emphasis that the fund management is giving to the optimum weight allocation of the 30 stocks in the portfolio reminds us of the northward movement of Nify in the last 1 year. This rise was purely a play of a handful of stocks, and if we have fund management teams who can get these bets right, it can be a windfall for investor portfolios. This is also the reason why, when we recommend funds from this space, we are very particular about the thought process of the respective fund management teams and the process that they follow, along with the track record of the person at the helm; any error can create major stress for the investors.

A focused fund is always recommended to our moderately aggressive and aggressive investors, with a time horizon of more than 5 years.

We will be getting back to you with details of the portfolio construction and the themes that Misra is playing out in the fund once the surplus has been completely deployed. Watch this space for a more detailed note on the fund.

 

Happy Investing!!!

 

 

Disclaimer

ifast and/or its content and research team's licensed representatives may own or have positions in the mutual funds of any of the asset management company mentioned or referred to in the article, and may from time to time add or dispose of, or be materially interested in any such. this article is not to be construed as an offer or solicitation for the subscription, purchase or sale of any mutual fund. no investment decision should be taken without first viewing a mutual fund's scheme information document including statement of additional information. any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. investors should seek for professional investment, tax, and legal advice before making an investment or any other decision. past performance and any forecast is not necessarily indicative of the future or likely performance of the mutual fund. the value of mutual funds and the income from them may fall as well as rise. opinions expressed herein are subject to change without notice. please read our disclaimer on the website.


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