Kotak Business Cycle Fund NFO

Kotak mutual fund has launched Business Cycle Fund NFO which is open for subscription till Sep 21st, 2022. It is an open-ended equity scheme. It will focus on riding the business cycle through dynamic allocation between different sectors and stocks at various stages of the business cycle in the economy

INVESTMENT OBJECTIVE

The scheme shall seek to generate long term capital appreciation by investing predominantly in equity and equity related securities with a focus on riding business cycles through dynamic allocation between various sectors and stocks at different stages of business cycles in the economy.

However, there is no assurance that the objective of the scheme will be realized.

INVESTMENT STRATEGY

The Fund would follow top-down approach of portfolio construction to identify stages of business cycle, sector opportunities and subsequently using bottom-up approach to identify strong companies within those sectors. The portfolio is therefore likely to be focused on few selected sectors which are likely to do well in a particular business cycle. Subsequently, for identifying companies within those sectors, the portfolio construction will be based on bottom-up stock picking using the Business, Management and Valuation (BMV) model. The Fund Manager will evaluate the business environment that a company operates in, the capability of the management to execute and scale up the business and valuation of the company based on fundamentals like discounted cash flows and PE ratios, etc.

The Scheme would aim to follow the business cycle approach to investing by identifying such economic trends and investing in the sectors and stocks that are likely to outperform at any given stage of the business cycle in the economy. The fund manager will consider various economic parameters (like corporate profit growth trend, GDP growth, Current Account Deficit, fiscal deficit, interest rates, inflation etc.), investment indicators (like investment in capex, capacity utilization, credit growth, etc.), business and consumer sentiment which are leading economic indicators (purchasing manager index, business confidence index, sales of various consumer discretionary products, etc.) to decide on the expansion or contraction phase in addition to other parameters.

BENCHMARK?

The performance of the Scheme is measured against Nifty 500 Total Return Index.

Rationale for adoption of benchmark:

The NIFTY 500 index represents top 500 companies selected based on full market capitalization from the eligible universe. The composition of the aforesaid benchmark is such that, it is most suited for comparing the performance of the scheme.

ASSET ALLOCATION

The asset allocation under the Scheme, under normal circumstances, is as follows:

Investments	Indicative Allocation	Risk Profile
Equity and Equity Related Securities selected on the basis of business cycle*	80%-100%	Very High
Other Equity and Equity Related Securities of companies	0%-20%	Very High
Debt and Money Market Securities#