HDFC Mutual Fund launches HDFC Pharma and Healthcare Fund. Should you invest?

HDFC Mutual Fund has launched HDFC Pharma and Healthcare Fund, an open-ended equity scheme investing in pharma and healthcare companies.

The new fund offer or NFO of the scheme is open for subscription and it will close on September 28. The scheme will re-open for continuous sale and repurchase within five business days from the date of allotment of units under NFO.

The investment objective of the scheme is to provide long-term capital appreciation by investing predominantly in equity and equity-related securities of pharma and healthcare companies.


The performance of the scheme will be benchmarked against S&P BSE Healthcare Index. The scheme will be managed by Nikhil Mathur, Dhruv Muchhal (overseas investments).

The scheme will offer both regular and direct plans with growth and IDCW options. The minimum application amount for purchase and switches is Rs 100 and any amount thereafter.

The scheme will invest 80-100% in equity and equity related instruments of pharma and healthcare companies, 0-20% in equity and equity related instruments of companies other than pharma and healthcare companies, 0-10% in units of REITs and InvITs, 0-20% in debt securities, money market instruments and fixed income derivatives, and 0-20% in units of mutual fund.

The scheme will follow a bottom-up approach to stock-picking and choose companies which are expected to derive benefit from growth in the pharma and healthcare segment.

The scheme is suitable for investors who are seeking to generate long-term capital appreciation and want investment predominantly in equity and equity related instruments of pharma and healthcare companies.

Should you invest?
ETMutualFunds always ask investors to invest in an NFO only if it offers something unique - that is, some investment option that is not available in the market or adding something to the existing option.

There are 11 pharma and healthcare schemes in the market, according to the ACE MF database. Out of 11 schemes, Quant Healthcare Fund is a relatively new scheme in the category. The scheme was launched in July. Other schemes have a performance record of over three years. SBI Healthcare Opportunities Fund, the topper in the category, gave 18.26%. Nippon India Pharma Fund gave 17.53%, followed by ICICI Prudential Pharma Healthcare & Diagnostics (P.H.D) Fund which offered 16.97%. Tata India Pharma & Healthcare Fund and Mirae Asset Healthcare Fund offered 16.90% and 16.83% respectively. DSP Healthcare Fund, UTI Healthcare Fund, and Aditya Birla Sun Life Pharma & Healthcare Fund gave 16.42%, 14.54%, 13.05% respectively. LIC MF Healthcare Fund, the only scheme to offer single-digit return, gave 9.15% in the three-year horizon.

Quant Healthcare Fund has offered 4.41% in one-month horizon.

ETMutualFunds do not recommend sector/thematic schemes to new and inexperienced investors. Pharma and healthcare funds are sectoral funds. Thematic or sector schemes invest most of their corpus in a particular sector, and the performance of schemes is based on performance of the sector. That is why thematic or sector funds are recommended only to investors with thorough knowledge about the sector. It is extremely important to get in and out of these schemes at the right time. Regular investors will find it difficult to execute. You can invest in these schemes only if you have intimate knowledge about the sector. You should also have a long investment horizon.