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Thanks to the relentless rally in the market, the Special Situation Funds under the thematic category has been gaining ground and worked well for investors who are willing to take a calculated risk. However, there are only three special situation funds from ICICI Prudential MF, Axis MF and Aditya Birla MF.
With the largest asset under management of ₹4,042 crore, ICICI Prudential India Opportunities Fund has posted a return of 112 per cent in the last year. Similar funds of Birla MF and Axis MF, which were launched last October and December, have delivered returns of 67 per cent and 39 per cent since inception. The AUM of these funds stands at ₹679 crore and ₹2,478 crore respectively.
Fund performance
The ICICI Pru India Opportunities fund has generated an alpha of 45 per cent over its benchmark, Nifty 500 TRI. Launched in January 2019, the net asset value of the fund has grown to ₹18.95 from ₹10 last year, while that of Aditya Birla Sun Life Special Opportunity and Axis Special Situation Fund was at ₹16.70 and ₹14, respectively.
The special situations fund invests in companies that provide investment opportunities due to temporary crisis in a company, economy, government action, regulatory changes, or even due to global events or uncertainties. In these times of uncertainty, the fund invests in fundamentally strong companies which face temporary setbacks due to special situations.
S Naren, Chief Investment Officer, ICICI Prudential MF, and the Fund Manager of India Opportunities Fund, said that while near-term performance volatility cannot be ruled out, the high conviction calls start playing out this strategy and tends to deliver robust returns in the medium term. “The pandemic brought about several special situation opportunities which were well capitalised,” he added.
Kaustubh Belapurkar, Director, Morningstar, said shares of fundamentally strong companies may decline due to a particular development but they bounce back as these challenges get addressed over time. “Investors who want to invest for 5-7 years can consider special situation funds,” he added.
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