In recent months, the various macroeconomic variables such as the Russia-Ukraine conflict, global policy interventions, significant inflationary tension, and rising fuel costs have caused intensified volatility in the Indian equity market. The fluctuations in the market environment, may influence the performance of your investments and impact the returns on your portfolio. Therefore, it is crucial to pick a fund with an investment strategy that is flexible to adapt to ever-changing market conditions.

Given the current market scenario, an investor’s mutual fund portfolio should include diversified equity funds. Multicap funds and Flexicap funds are the two diversified equity schemes that invest across market capitalization and provide benefits of diversification to investors. Flexi-cap funds allow fund managers more flexibility to move between large, mid, and small caps, and they will try to generate alpha from stock as well as market cap selection based on prevailing market conditions. Whereas Multicap funds follow the mandate and will focus more on the stock selection with a pre-defined cap of at least 25% allocation across each market cap.

Thus, Flexicap funds are worth considering for investors seeking diversification across three market caps and willing to avoid hassles of deciding allocation amongst large, mid & small cap stocks on their own. Flexicap funds provides investors an opportunity to generate optimal returns, as the Flexicap strategy helps balance the risk-reward ratio.

WhiteOak Capital Mutual Fund has launched WhiteOak Capital Flexicap Fund. It is an open-ended dynamic equity scheme investing across large cap, mid cap and small cap stocks. The fund house is a new entrant in the mutual fund industry and it is backed by WhiteOak Capital Group founded by Mr Prashant Khemka who has been a former CIO and lead portfolio manager of Goldman Sachs Asset Management.

Mr Aashish Somaiyaa, CEO at WhiteOak Capital Mutual Fund, said “WhiteOak Capital Mutual Fund intends to fill a vacuum of actively managed funds in India. Our company has instituted a performance-first culture, earning the confidence of investors in India as well as overseas. India continues to be among the most favourable investment destinations in the world, with a high alpha potential embedded on the canvas of a high growth economy. We believe there is a huge scope of differentiation in the industry, and we will leave no stone unturned to provide best-in-class investment products to retail investors.”

Table 1: Details of WhiteOak Capital Flexicap Fund

Type An open-ended Dynamic Equity Scheme Investing Across Large Cap, Mid Cap and Small Cap Stocks. Category Flexi Cap Fund
Investment Objective To generate long-term capital appreciation by investing predominately in equity & equity related instruments across the spectrum of various market capitalization. However, there can be no assurance or guarantee that the investment objective of the Scheme would be achieved.
Min. Investment Rs 500/- and in multiples of Re 1 thereafter. Additional Purchase Rs 500/- and in multiples of Re 1 thereafter. Face Value Rs 10/- per unit
SIP/SWP/STP Available
  • Direct
  • Regular
  • Growth
  • Income Distribution Cum Capital Withdrawal (IDCW)
Entry Load Not Applicable Exit Load
  • In respect of each purchase / switch-in of Units, an Exit Load of 1.00% is payable if Units are redeemed/ switched-out within 1 month from the date of allotment.
  • No Exit Load is payable if Units are redeemed / switched-out after 1 month from the date of allotment. No Entry / Exit Load shall be levied on units allotted on IDCW reinvestment.
Fund Manager
  • Mr Ramesh Mantri
  • Mr Piyush Baranwal (For Debt Securities)
Benchmark Index S&P BSE 500 TRI
Issue Opens: July 12, 2022 Issue Closes: July 26, 2022

(Source: Scheme Information Document)  

The investment strategy of WhiteOak Capital Flexicap Fund will be as follows:

WhiteOak Capital Flexicap Fund will predominantly invest in equity & equity related instruments across market capitalization viz. Large cap, mid cap and small companies to achieve the investment objective of the scheme and to generate capital appreciation / income from a portfolio.

The investment strategy is to invest in companies spanning entire market capitalization, the aim of Flexicap strategy will be to build a portfolio, representing a cross section of companies diversified across major industries, economic sectors and market capitalization that offer an acceptable risk reward balance. Though every endeavour will be made to achieve the objective of the Scheme, the AMC/ Sponsors/Trustee do not guarantee that the investment objective of the Scheme will be achieved. No guaranteed returns are being offered under the Scheme.

The scheme will concentrate on creating a portfolio that is well-balanced and can perform through all market cycles without favouring any one market cap, investment style, or sector. The fund house does not employ the popular valuation ratios, such as the price-to-book or price-to-earnings ratio, to find investment opportunities. It uses an internal, proprietary investment framework called ‘Opco-Finco’, which is focused on cash flow and offers distinct insights over accounting earnings-based company models. The fund will use a rigorous bottom-up stock selection methodology for sector exposures.

The Fund managers will consciously seek to maintain a balanced portfolio rather than being driven by non-stock specific macro factors, such as market timing, sector, currency or other such factor exposures.

Under normal circumstances, the asset allocation will be as under:

Table 2: Asset Allocation for WhiteOak Capital Flexicap Fund

Instruments Indicative Allocation (% of assets) Risk Profile
Minimum Maximum High/Medium/Low
Equity and Equity Related Instruments 65 100 Very High
Debt Securities and Money Market Instruments 0 35 Low to Medium
Units issued by REITs and InvITs 0 10 Very High

(Source: Scheme Information Document)  

The scheme shall invest part of its portfolio in debt and money market instruments subject to permissible limits laid under SEBI (MF) Regulations and will be guided by credit quality, liquidity, interest rates outlook. The scheme shall also have an exposure to derivative instruments for the purpose of hedging, portfolio balancing and optimising returns.

Who will manage WhiteOak Capital Flexicap Fund?

Mr Ramesh Mantri and Mr Piyush Baranwal (for debt securities) will be the designated fund managers for this scheme.

Mr Ramesh Mantri is a CA and CFA, he also holds an MBA degree with an overall experience of 18 years in the financial market. Prior to joining WhiteOak Capital Mutual Fund he has been associated with White Oak Capital Management LLP, Ashoka Capital Advisers, Smith Management-Mumbai Office and CRISIL. At WhiteOak Capital AMC, Mr Mantri currently does not manage any other schemes.

Mr Piyush Baranwal is a CFA and holds a Bachelor of Engineering degree and PGDBM. He has over 13 years’ experience in Portfolio Management and trading in Fixed Income securities. Prior to joining WhiteOak Capital Mutual Fund, he was working with BOI AXA Investment Managers, Morgan Stanley Investment Management and Principal PNB Asset Management Company.

At WhiteOak Capital AMC, Mr Baranwal currently manages WhiteOak Capital Overnight Fund, WhiteOak Capital Liquid Fund and WhiteOak Capital Ultra Short Term Fund.

Fund Outlook – WhiteOak Capital Flexicap Fund

WhiteOak Capital Flexi Cap Fund is an open-ended dynamic equity scheme investing across large cap, mid cap & small cap stocks with an aim to offer its investors benefits of all three market capitalizations without any market cap bias. There is no predetermined allocation towards any of the market capitalizations or sectors or any of the investment styles.

The focus of the scheme is on identifying good businesses at right valuations and not get influenced by macro-economic variables. The fund will seek to maintain a balanced portfolio of both cyclical and counter-cyclical sectors, with the goal of outperforming market cycles.

Being an actively managed Flexicap scheme, it offers fund managers the flexibility to decide the actual portfolio exposure towards companies based on the fundamentals of businesses and their long term growth potential. The scheme aims to construct a portfolio which may help to unlock growth opportunities for investors.

However, do note that even though the scheme invests in opportunities across market-cap spectrum and reduces non-systematic risk with proper diversification, it is not immune to market risks. If the fund manager increases the exposure to mid and small-cap stocks, which are highly risky in nature, the portfolio may witness higher volatility. The scheme being actively managed, the fund manager’s ability to construct the Flexi Cap portfolio remains to be seen.

Additionally, the persistent repercussions of the Russia-Ukraine conflict, rising interest rates, and spiralling inflation are all issues that represent a significant risk to economic growth and are the root cause of the prevailing high market volatility. The margin of safety appears to be narrow, and the clear direction for the equity market from the current elevated levels is unknown. These, among many other factors, may affect the scheme’s performance, and the portfolio may face higher volatility in the near term.

Thus, this Flexi-cap scheme is suitable only for high-risk investors who can stomach the market volatility with a long investment horizon of at least 5-7 years. Ensure that your investment objectives align with the fund.

This article first appeared on PersonalFN here

Leave a Reply

Your email address will not be published. Required fields are marked *