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In times when India is perceived to be a "bright spot" and a promising investment destination for wealth creation, at the same time there is volatility due to global events and general elections in India at present, two relatively new fund houses -- Samco Mutual Fund and WhiteOak Capital Mutual Fund - have launched 'Special Opportunities Fund'.
Special Opportunities Funds are thematic equity funds that aim to play upon both, positive and negative events in the market. The temporary negatives are the ones that have an impact on stock prices, while positive developments are not fully priced into the stock price and offer unique opportunities.
Besides, market corporate structuring (including mergers and acquisitions), changes in government policies or regulatory changes, global events and uncertainties, as well as new trends, innovation and sectors, that could make compelling investment propositions are considered to be special situations.
So, special situations or opportunities are a mix of conventional and unconventional thinking.
Samco Special Opportunities Fund
Speaking of the Samco Special Opportunities Fund (SSOF), it is built on a unique proprietary DISRUPTION model which has 10 distinct sub-strategies, such as:
Digitisation
Insider Mirror Trading
Spin-offs and Corporate Actions
Reforms - Regulatory and Governmental
Undervalued Holding Companies
Premiumisation
Trends sustainable over time
Innovation & Technological Disruptions
Organisational Shift
New & Emerging Sectors
Each of these is designed to uncover special situations within diverse themes. The fund capitalizes on market inefficiencies that could be undervalued or overlooked opportunities.
SSOF holds a mandate to allocate 80% to 100% of its net assets in equity & equity-related instruments of special situations theme. Up to 20% of the equity assets may be deployed in equity and equity-related instruments of other companies.
Further, the Scheme may seek investment opportunities in foreign securities including ADRs, GDRs and Foreign equity, not exceeding 20% of the assets of the Scheme.
The Scheme may also use derivatives (as per the regulatory guidelines) for hedging purposes.
The fund's strategy encompasses a broad spectrum, including digitization, insider mirror trading, spin-offs, reforms, undervalued holding companies, premiumization, sustainable trends, innovation, organized shifts, and new or emerging sectors. This diversified approach seeks to exploit a range of growth opportunities across different sectors and market conditions.
Hence, the investment objective of SSOF is "to achieve long-term capital appreciation by investing in a portfolio of securities that are involved in special situations such as restructurings, turnarounds, spin-offs, mergers & acquisitions, new trends, new & emerging sectors, digitization, premiumization, and other special corporate actions. These situations often create mispricings and undervalued opportunities that the fund aims to exploit for potential capital appreciation. However, there can be no assurance or guarantee that the investment objective of the scheme would be achieved."
SSOF is sector-agnostic and does not limit its investment scope to companies of a specific market capitalization. The fund could invest from large-caps to micro-caps while following its investment mandate.
Here's what Mr. Viraf Gandhi, the CEO of Samco Mutual Fund, said about the fund launch:
"At Samco Mutual Fund, our mission is to empower investors with cutting-edge and reliable financial solutions. Dynamism and adaptability are at the core of the Samco Special Opportunities Fund. Our fund exemplifies dynamic flexibility, crucial for navigating the ever-changing landscape of sectors and themes in the investment world."
SSOF will benchmark its performance against the Nifty 500 Total Return Index (TRI).
Mr. Paras Matalia and Mr. Umeshkumar Mehta will jointly manage the SSOF. Further, Mr. Dhawal Ghanshyam Dhanani will be the dedicated fund manager for overseas investments.
Mr. Matalia is the head of equity research at Samco Mutual Fund and has nearly 6 years of experience in the capital markets. He has been crucial in the creation of the proprietary HexaShield framework at Samco which does periodic scenario analysis on fundamentals of thousands of companies across the globe. Being tech-savvy, he has a strong understanding of how to leverage technology to improve investment and portfolio management prowess. He is an expert on fundamental analysis and is passionate about understanding business strategies. He is a commerce graduate (B.Com) and a Chartered Accountant (CA).
Mr. Mehta is the Chief Investment Officer (CIO) of Samco Mutual Fund. He has over 20 years of experience in the financial services industry and has a deep understanding of price and value. He used to lead the Samco group's research team and has been associated with the Samco group for the last 15 years. He is a commerce graduate (B.Com), a Chartered Accountant (CA), and has a Post Graduate Diploma in Business Administration (PGDBA).
Mr. Dhanani (the dedicated fund manager for overseas investments) has over 5 years of work experience -- with more than 3 years spanning capital markets and investment research -- and has been known for an in-depth examination of the business models and computational crux of varied Indian companies. His multi-disciplinary approach and working knowledge of fundamentals have aided the prime objective of guiding investors through insightful ideas for the long term. He is a commerce graduate (B.Com) and a Chartered Accountant (CA).
Samco Special Opportunities Fund during the NFO period is open for subscription from May 17, 2024, to May 31, 2024, and has both Regular Plan and Direct Plan options for investment. Note, that dividends will not be declared by Samco Special Opportunities Fund and only Growth Option will be available.
The minimum investment amount is Rs 5,000/- and in multiples of Re 1 thereafter. In the case of the Systematic Investment Plan (SIP) mode, the minimum amount and SIP instalments are as under:
- Monthly SIP (12 instalments): Rs. 500/- and in multiples of Re. 1/- thereafter
- Monthly SIP (6 instalments): Rs. 1,000/- and in multiple of Re. 1/- thereafter
- Quarterly SIP (4 instalments): Rs. 1,500/- and in multiple of Re. 1/- thereafter
- Half-yearly SIP (2 instalments): Rs. 3,000/- and in multiples of Re. 1/- thereafter
- To learn more about Samco Special Opportunities Fund download and read the Scheme Information Document and Key Information Memorandum.
WhiteOak Capital Special Opportunities Fund
This scheme also has a similar investment mandate. It endeavours to capitalise on unique situations, opportunities or challenges faced by a company, sector, or economy, which may create a disruption in the price.
Examples of Special Situations
(Source: Investor Presentation)
The uncertainties caused by special situations usually result in overreaction in the form of fear/panic (wherein the adverse impact is excessively factored into market prices), or there is less pessimism or underreaction (wherein the positive event with favourable impact is only partially factored into the market price). These situations create investment opportunities.
Mr. Aashish Somaiyaa, CEO of WhiteOak Capital Mutual Fund, highlighting the fund's strategic approach and quoting Winston Churchill, said "Never let a good crisis go to waste."
In a press release, Mr. Somaiyaa stated:
"The equity market has remained eventful in the past and is likely to be eventful in future as well. The key is to identify a situation in which a stock's current market price is significantly lower than its intrinsic (fair) value due to an unfavourable event or pessimism about new development. Bottom-up stock selection and in-depth analysis here plays a pivotal role in analysing the intrinsic value of the stock compared to its market price. This is where active management of our fund with bottom-up stock selection & strong research expertise will play an important role."
The primary investment objective of WhiteOak Capital Special Opportunities Fund is "to generate long-term capital appreciation by investing in opportunities presented by special situations such as corporate restructuring, mergers & acquisitions, government policy and/or regulatory changes, technology-led disruption and innovation, new trends, new & emerging sectors, companies/sectors going through temporary unique challenges and other similar instances. However, there can be no assurance that the investment objective of the Scheme will be realized."
It is not necessary that all unique situations can lead to "Special Opportunities". Investing in special situations requires probabilistic thinking, as future outcomes are uncertain. You need a contrarian mindset, questioning everything, but you don't have to be a contrarian for the sake of it; sometimes the market is right.
As a strategy, other than investing a dominant portion of the assets in special opportunity equities, for diversification WhiteOak Capital Special Opportunities Fund will also invest up to 20% of its net assets in other companies.
WhiteOak Capital Special Opportunities Fund will benchmark its performance against the S&P 500 Total Return Index (TRI).
Mr. Dheeraj Pathak and Ms. Trupti Agrawal will jointly manage the WhiteOak Capital Special Opportunities Fund. Further, Mr. Piyush Baranwal will manage the debt portion, which would be around 20% of the entire portfolio.
Mr. Pathak has over 16 years of work experience in the financial markets and is a commerce graduate (B.Com) and Chartered Accountant. He also manages multiple other equity schemes at WhiteOak Capital Mutual Fund.
Ms. Agrawal is the assistant fund manager - equities. She has a collective work experience of around 15 years and is a commerce graduate (B.Com) and Chartered Accountant. She is also a co-fund manager of a few other equity mutual fund schemes at the fund house.
Mr. Baranwal is a senior fund manager - fixed income. He has over 14 years of experience in portfolio management and trading in fixed-income securities. Mr. Baranwal holds a bachelor's degree, PGDBM (Finance) and has completed the CFA certification course conducted by the CFA Institute, USA.
WhiteOak Capital Special Opportunities Fund during the NFO period is open for subscription from May 15, 2024, to May 29, 2024, and has both Regular Plan and Direct Plan options for investment. Both plans offer Growth Options. Currently, the scheme is not offering Dividend Option -- now known as Income Distribution cum Capital Withdrawal Option (IDCW).
The minimum investment amount is Rs 500/- and in multiples of Re 1 thereafter. In the case of the Systematic Investment Plan (SIP) mode, the minimum amount and SIP instalments are as under:
- Weekly (minimum 6 instalments): Rs. 100/- and in multiples of Re. 1/- thereafter
- Fortnightly (minimum 6 instalments): Rs. 100/- and in multiples of Re. 1/- thereafter
- Monthly SIP (minimum 6 instalments): Rs. 100/- and in multiples of Re. 1/- thereafter
- Quarterly SIP (minimum 4 instalments): Rs. 500/- and in multiple of Re. 1/- thereafter
To know more about WhiteOak Capital Special Opportunities Fund download and read the Scheme Information Document and Key Information Memorandum.
Keep in mind, 'Special Opportunities Funds' are suitable for investors who are seeking long-term capital appreciation through an actively managed thematic equity scheme that invests in stocks based on special situations theme. That said, they are a very high-risk investment proposition.
When adding mutual fund schemes to your portfolio consider your risk profile, broader investment objective, the financial goals you wish to address and time in hand to achieve those envisioned goals to make a prudent and suitable choice rather than investing in schemes in an ad hoc manner.
Be a thoughtful investor.
Happy Investing!