Investors with a risk appetite can check out Samco's maiden fund

Investors with an appetite for risks around a highly-concentrated share portfolio by a newcomer could consider Samco Mutual Fund's flexi cap fund - the first offering by the debutant. While investment advisors said the fund house's stock-picking processes point to focus on quality, the scheme is vulnerable to periods of underperformance due to its investment strategy.

The new fund offer is currently open and closes on January 31. Samco has raised the cost of an early exit by imposing an exit load of 2% if the investment is redeemed before 365 days from the date of allotment of units. For redemption from 365 to 730 days, the exit load is 1%. Most equity schemes have an exit load of 1% for redemptions within one year.

Samco Flexi Cap scheme's fund manager will build a portfolio that is a mix of 25 domestic and international stocks with the flexibility to allocate across large, mid and small cap stocks. At least 65% of the portfolio will be allocated to domestic stocks to enable investors to get equity taxation. The stock picks will be based on Samco MF's in-house proprietary investment framework - the Hexashield Framework, which will shortlist companies on six parameters - competitive strength and pricing power, balance sheet and insolvency, reinvestment and growth, corporate governance and leadership, cash flow and regulatory.


"We are confident that the fund management team has a strong understanding and fair span of control on its investment process," says Nirav Karkera, head of research, Fisdom.

Karkera believes chances of the fund manager missing out on good companies because of the stock selection model and risks due to highly concentrated portfolios are two challenges for the fund.

Financial planners believe the process of choosing quality companies works well over the long term. But there could be phases where quality could underperform in the short term. For example, Nifty Quality 30 has returned 19.05% over the last one year, vis-a-vis Nifty 50's 25.72% return.

"Investors who believe in equity as a long-term asset class and are not worried about intermittent ups and downs and do not want volatility could consider investing in this fund systematically," said Anup Bhaiya, founder, Money Honey Financial Services.