Principal Midcap Fund: NFO Review

Principal Mutual Fund has launched a new mid cap scheme, Principal Midcap Fund. The new scheme will invest predominantly in mid cap stocks or stocks that are between 101 to 250 by market capitalisation. The new fund offer is open for subscription till December 20. The scheme will be jointly managed by Ravi Gopalakrishnan and Sudhir Kedia.

The scheme is like other existing mid cap schemes in the market, but has two add-on features: SMART and My Gain. According to the fund house, through the SMART facility, investors can stagger their investment in Principal Midcap Fund into four equal instalments. 25% of the application money is invested upfront in Principal Midcap Fund while the remaining 75% is invested in Principal Cash Management Fund.

According to a press release sent by the fund house, if the benchmark index falls 3% from the date of allotment, the SMART facility gets activated and 25% of the initial investment is automatically shifted to Principal Midcap Fund else the switch takes place from Principal Cash Management Fund to Principal Midcap Fund at the month end. In a nutshell, this facility helps reduce the risk of timing the market.


My Gain facility allows investors to set a target rate of return to activate auto trigger which automatically shifts the amount of appreciation to another fund of the investor’s choice when the target return is achieved.

Should you invest?
Many mutual fund advisors believe that this is a good time to start investing in the mid cap space as the valuations look attractive. Shifali Satsangee, founder, Funds Veeda, believes that the mid cap space is discounted and that makes sense for fund houses to come up with mid cap mutual fund schemes at this point. However, she says that retail investors don’t need to bet on the new scheme. “It is a good time to allocate to mid caps, but investors will be better off in an established fund. We have mid cap schemes that have seen all kinds of market cycles for years. I believe betting on them would be more appropriate for mutual fund investors,” says Shifali Satsangee.

Satsangee, like many other mutual fund advisors, believes that investors should always choose schemes with a consistent track record over the newly launched schemes. “Unless the new scheme has something that the market doesn’t already have, you are good with the established schemes,” says Shifali Satsangee.

Related story: Best mid cap mutual funds to invest in 2019

Scheme at a glance:
Benchmark: NIFTY Midcap 100 TRI
Exit Load: For units in excess of 20% of the investment, 1% will be charged for redemption within 365 days
Category: Equity: Mid Cap
Plans: Growth, Dividend

Minimum Application Amount:
New Investor – Rs 5,000
SMART (available only during NFO) – Rs 25,000
Systematic Investment Plan: Minimum twelve instalments of Rs 500 each
Systematic Transfer Plan: Minimum six instalments of Rs 1,000 each
Regular Withdrawal Plan: Minimum six instalments of Rs 500 each