NFO: ICICI Prudential Opportunities Fund, a Special Situations theme – Should you invest?

ICICI Prudential MF has recently announced its New Fund Offer based on the Special Situations theme – ICICI Prudential Opportunities Fund. Is this just one more fund or is there something unique?

Do you know which was the first special situations fund launched in India? It was the Fidelity (now known as L&T) Special Situations Fund launched in 2006.  Post the take over of Fidelity by L&T and with the new SEBI categorisation norms in 2018, the fund is now known as L&T Large & Mid cap Fund.

Yet another special situations fund was with Aditya Birla SL Mutual Fund. As SEBI’s new norms came into force the fund was merged with Aditya Birla SL Equity Fund.

And now this NFO. So, yes this is not the first one. 

A special situation fund has a different focus area in terms of the opportunities it goes after. This is how the ICICI Prudential Opportunities Fund’s investment objective puts it as:

To generate long term capital appreciation by investing in opportunities presented by special situations such as corporate restructuring, Govt policy / regulatory changes, companies going through temporary unique challenges and other similar instances.

Remember how you or some of your friends jumped to pick up ICICI Bank stock when it was reeling under a recent controversy, or Nestle stock when its largest market share product, Maggi Noodles, faced regulatory hurdles. That’s the kind of work this fund will do.

In the current scenario, it could be the Banking sector (given NBFCs are facing issues), Telecom (with the wave of consolidation it is going through) and Exports (given the global uncertainty over trade tariffs). (Source)

Well, India and its businesses are in a perennial special situations mode. 🙂

In terms of its investing style, the fund is likely to have a concentrated portfolio with lots of activity. As stocks/sectors go from unfavourable to favourable and new opportunities emerge, the fund will not hold back hopping from one to another.

Fund Manager

The fund will be managed by S. Naren and Roshan Chutkey. ICICI Pru MF has found that its Executive Director and CIO has a huge fan following and almost every new equity fund launched includes his name as a fund manager.

This is where it becomes tricky. As per the scheme information document for the NFO, S Naren’s name as Fund Manager is associated with 38 other schemes.

Star fund manager, anyone!

Should you invest in the NFO of ICICI Prudential Opportunities Fund?

Firstly, this fund is a thematic fund. Besides the special situations theme, there is nothing much unique about the fund.

The fund can pick its stocks from any market cap or sector and in that it resembles a multi-cap fund. See, even the index benchmark is Nifty 500. The theme makes it a subset of the multi-cap category.

ICICI Pru MF also has its flagship Value Discovery Fund, which already is present in and captures a lot of what the special situations fund will do. At least, it has some track record too.

My question then is that will not the multi-cap funds try and find the best of the opportunities for their portfolios?

Not to mention there is a PHD (healthcare theme), Infrastructure theme, Exports theme and the Bharat Consumption theme based funds already available to investors.

And what has become of special situations funds in India? If the earlier 2 examples of L&T and ABSL MF are anything to go, not much. It remains to be seen, if ICICI Pru proves otherwise.

ICICI MF means business. It is now the largest fund house in India by size and makes a lot of efforts to remain at the perch. A whole series of thematic and closed ended funds have been used by the fund house to keep attracting new money.

The NFO is just one more scheme to keep adding to the kitty.

The small retail investor can continue to focus on their existing fund portfolio and safely ignore this fund.

As for the others, you ought to know what you are doing.