In challenging times only a handful of\ncompanies manage to sustain growth because they continuously produce innovative\nprocess and systems that help them keep up with the changing times and become\npioneers. <\/p>\n\n\n\n

Considering the current turbulent times,\nthere are such companies that can become pioneers that utilize new forms of\nproduction, technology, distribution or processes which are likely to challenge\nexisting markets or value networks or displace established market leaders or\nbring in novel products and\/or business models.<\/p>\n\n\n\n

Kotak Mutual Fund<\/a> is of the view that by investing in such companies can help in capital appreciation for over a long-term investment horizon. Fundamentally because pioneering companies are product innovators, process innovators, value innovators, reinvent distribution strategies\/networks for business advantage, technology adopters and global innovators.<\/p>\n\n\n\n

Pioneering companies: <\/p>\n\n\n\n

• Extend the Growth Profile &\nLongevity of Company.<\/li>
• Improve Customer Stickiness<\/li>
• Enhances the Moat \u2013 Strengthens\nCompetitive Advantage.<\/li>
• Be One Step into the Future \u2013\nWow the Market.<\/li>
• Gravitating to Winner Takes All\nMarkets<\/li><\/ul>\n\n\n\n

  Hence the fund house launched Kotak Pioneer\nFund that will invest in pioneering innovation theme for there is ample\nopportunity in the Universe in India:<\/p>\n\n\n\n

  • Dynamic Universe Presently of\nAround 120 Companies<\/li>
  • Cumulative Market Cap of\nPioneer Universe \u2013 US $550bn, Approx. 30% Of Overall Indian Market Cap<\/li>
  • A Multi-cap-oriented Approach\nto Investing with Diversification across Sectors<\/li>
  • Access to Relatively New\nEconomy Businesses<\/li>
  • Good Mix of Large, Mid and\nSmall Caps in Universe<\/li><\/ul>\n\n\n\n

    And KPF seeks to ride the megatrend of 4^{th<\/sup>\nindustrialisation and the innovation boom that will create definite winners. Hence\nas per the current AMFI mandate, KPF will mainly aim to invest in a minimum 80%\nof its total assets in companies (domestic and global [35%]) having pioneering\ninnovations theme within the prescribed limits.  <\/p>\n\n\n\n}

    Also, the scheme may take a smaller\nexposure to equity and equity-related securities of other companies other than\nhaving pioneering innovations theme, debt and money market Securities, and\nUnits issued by REITs & InvITs.<\/p>\n\n\n\n

    But from a risk standpoint, given the\nportfolio allocation is skewed heavily to equity, KPF is a high-risk contender\nand thus suitable only for investors who have a high-to-very high-risk appetite\nand an investment horizon of at least 5 years.<\/p>\n\n\n\n

    Do note, a sector fund is a sub-category of equity mutual fund<\/a> that invests in companies of one sector of the market. Sector funds are a very-high risk-very high return investment proposition, as the fortune of the fund is closely linked to the undercurrents of a specific sector, although it could invest across the market capitalization spectrum.<\/p>\n\n\n\n

    Table1: Details of KPF<\/em><\/strong><\/p>\n\n\n\n

    \n Type<\/strong>\n <\/td>	An open-ended equity scheme <\/td>	\n Category<\/strong>\n <\/td>	Thematic\/Sector (investing in pioneering innovation theme.)<\/td><\/tr>
    \n Investment Objective<\/strong>\n <\/td>	\n To generate capital appreciation from a diversified portfolio of equity, equity-related instruments and units of global mutual funds which invests into such companies that utilize new forms of production, technology, distribution or processes which are likely to challenge existing markets or value networks, or displace established market leaders, or bring in novel products and\/or business models. \n However, there can be no assurance that the investment objective of the Scheme will be realized.\n <\/td><\/tr>
    \n Min. Investment<\/strong>\n <\/td>	\n Rs 5,000 – and in multiples of Rs 1 for purchases and Rs. 0.01 for switches\n <\/td>	\n Face Value<\/strong>\n <\/td>	Rs 10 per unit<\/td><\/tr>\n\t
    \n Plans <\/strong>\n <\/td>	\n \u2022 Regular \n\t\u2022 Direct<\/td>	\n Options<\/strong>\n <\/td>	\n \n\t\t Growth (Option A) * <\/li>\n\t \tDividend (Option B) <\/li>\n\t \n\t Payout Dividend <\/li>\n\t\t Reinvest Dividend*<\/li>\n\t <\/ul>\n\t<\/ul>\n\t* default option\n <\/td><\/tr>\n\t
    \n Entry Load<\/strong>\n <\/td>	Nil<\/td>	\n Exit Load<\/strong>\n <\/td>	\n\t\t For redemptions\/switch outs (including SIP\/STP) within 1 year from the date of allotment of units, irrespective of the amount of investment: 1%<\/li>\n\t\t If units are redeemed or switched out (including SIP\/STP) after 1 year from the date of allotment of units, irrespective of the amount of investment: Nil.<\/li>\n\t\t\n\t\t\n\t\t<\/ul>\n <\/td><\/tr>
    \n Fund Manager<\/strong>\n <\/td>	Mr Harish Krishnan and Mr Arjun Khanna<\/td>	\n Benchmark Index<\/strong>\n <\/td>	85% IISL KOTAK INDIA PIONEERING INNOVATIONS INDEX + 15% MSCI ACWI INFORMATION TECHNOLOGY INDEX TRI.<\/td><\/tr>
    \n Issue Opens<\/strong>\n <\/td>	October 9, 2019<\/td>	\n Issue Closes:<\/strong>\n <\/td>	October 23, 2019\n<\/td><\/tr><\/tbody><\/table><\/div><\/center>\n\n\n\n (Source: Scheme Information Document<\/a>)<\/p>\n\n\n\n What is the Asset Allocation of Kotak Pioneer Fund?<\/strong><\/p>\n\n\n\n The asset allocation under the Scheme, under normal circumstances, will be as follows: <\/p>\n\n\n\n Table 2: KPF’s Asset Allocation<\/em><\/strong><\/p>\n\n\n\n \n Instruments<\/strong>\n <\/td> \n Allocation <\/strong>\n <\/td> \n Risk\n Profile<\/strong>\n <\/td><\/tr> \n Equity and Equity Related Securities of companies having pioneering innovations theme*\n <\/td> 80%-100%<\/td> \n High\n <\/td><\/tr> Equity and Equity Related Securities of companies other than having pioneering innovations theme<\/td> 0%- 20%<\/td>\n High<\/td><\/tr>\n\t\n\t \n Debt and Money Market Securities\n <\/td> 0%-20%<\/td> \n Low to Medium\n <\/td><\/tr>\n\t \n Units issued by REITs\/ InvITs\n <\/td> 0-10%<\/td> \n Medium to High\n <\/td><\/tr>\n\t\n\t<\/tbody><\/table><\/div><\/center>\n\n\n\n *The scheme may invest upto a maximum of 35%\nin units of overseas Mutual Funds schemes \/ ETFs with similar investment\nobjective or strategy \/ Foreign securities# having pioneering innovation theme.<\/p>\n\n\n\n #The Scheme will invest up to a maximum of 35%\nof its net assets in foreign securities as specified in the SEBI circular-\nSEBI\/IMD\/CIR No.7\/104753\/07 dated September 26, 2007, and any subsequent\namendments thereto specified by SEBI and\/or RBI from time to time. The scheme\nmay invest in GDRs\/ADRs including overseas markets in GDRs\/ ADRs, overseas\nequity, bonds and mutual funds and such other instruments as may be allowed\nunder the Regulations from time to time.<\/p>\n\n\n\n (Source: Scheme Information Document<\/a>)<\/p>\n\n\n\n What is the Investment Strategy of the Scheme?<\/strong><\/p>\n\n\n\n To achieve the investment objective of the Kotak\nPioneer Fund to generate capital appreciation from a diversified portfolio of\nequity, equity-related instruments and units of global mutual funds it will invest\nin companies that utilize new forms of production, technology, distribution or\nprocess which are likely to significantly challenge existing markets and value\nnetworks, and displace established market operators, products and\/or business\nmodels.<\/p>\n\n\n\n Definition\nof Pioneering Innovations as a theme:<\/em><\/em><\/p>\n\n\n\n The underlying investment philosophy of Kotak\nPioneer Fund would be to invest in such companies that have the potential to\nbring in sustained higher growth and change the competitive business\nenvironment due to their ability to:<\/p>\n\n\n\n Produce a new thing (a new\nproduct\/service) or<\/li> A new way of making a thing (a\nNew Process) or <\/li> A new way of using a Thing (New\nconsumer Value or behaviour)<\/li> A new way of reaching out to customer\neither by disintermediating intermediaries or leveraging technology <\/li> A technological innovation\nwhich results into a new or improved product or service to the consumer.<\/li><\/ol>\n\n\n\n The fund seeks to invest in such companies\nthat utilize technological and\/or procedural ability to operate and create\nlarge value for customers, government, society by way of either time savings,\ncost savings, enable better engagement or make them more productive.<\/p>\n\n\n\n Such pioneering companies are typically\nuninhibited in utilizing new technologies within their field of operation;\nadapt new and audacious strategies; may be indifferent to their size vis-\u00e0-vis\nthe competition, and many times would not even be classifiable as an operant in\nany particular sector or market cap segment. The business activity of such\ncompanies creates competitive advantage which proves to be difficult for the\ncompetitors to surmount, meet or replicate.<\/p>\n\n\n\n The pioneering companies can also utilize\nexisting technologies and provide mundane services but their method or their\nproduct or their business model makes them a peculiar and potentially pioneering\nplayer within their business segment. <\/p>\n\n\n\n Thus, given India\u2018s status as a developing\neconomy, the fund may spot early disruption cycle and a resultant investment\nopportunity, even in mundane sectors and businesses, which otherwise may be\nconsidered as sunset sectors in developed nations. <\/p>\n\n\n\n As an example, the domestic equity\nportfolio may invest in companies that are creating or utilizing patents,\nprocesses ,or products that will challenge the business of their competitors;\nand \/or  Or such companies that have\ndeveloped a new process to manufacture an old molecule, metal, car, building,\netc.<\/p>\n\n\n\n Likewise, KPF will consider such companies\nto be pioneering that will bring new technology\/materials\/processes that\nchallenge the way the things are manufactured, or services are being rendered,\nor new ways are being found to delight the customers.<\/p>\n\n\n\n The scheme will also seek to invest in such\ncompanies that may be servicing or partnering or may be benefitting from such\npioneering companies (as defined above), globally and\/or in overseas mutual\nfunds investing in such companies. <\/p>\n\n\n\n The fund would seek to invest in unlisted\nequities of companies as permitted from SEBI from time to time that is in line\nwith the said theme and maybe operating to disrupt the competitive landscape of\nthe Indian industry.<\/p>\n\n\n\n Through the mutual funds route, this fund\nwill seek to invest in global funds that invest in companies inventing or\nutilizing innovative technologies such as, but not limited to, artificial\nintelligence, cloud computing, robotics, energy renewables, energy storage,\nadvanced materials, 3D printing, autonomous and near-autonomous vehicles,\ninternet of things, knowledge work automation, nanotechnology, advanced\ngenomics, augmented reality, advanced energy exploration and distribution,\nmobile internet etc.<\/p>\n\n\n\n The portfolio construction will be based on thematic and a balanced approach between top-down and bottom-up stock picking<\/a> 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.<\/p>\n\n\n\n Who\nwill manage the Kotak Pioneer Fund?<\/strong><\/p>\n\n\n\n Mr Harish Krishnan will be the lead Fund\nManager of the Kotak Pioneer Fund while Mr Arjun Khanna will be the Dedicated\nFund Manager for investments in foreign securities.<\/p>\n\n\n\n Mr\nHarish Krishnan<\/strong> is the Sr. Vice president (Fund\nManager) at Kotak Mahindra AMC.  He is a\nBachelor of Technology (Electronics & Communications) from Government\nEngineering College, Trichur, a Postgraduate in Management from Indian\nInstitute of Management, Kozhikode and a Chartered Financial Analyst from the\nCFA Institute. <\/p>\n\n\n\n Mr Krishnan has 14 years of experience\nspread over Equity Research and Fund Management. Prior to joining Kotak\nMahindra Mutual Fund, he was based out of Singapore and Dubai, managing Kotak’s\noffshore funds. He has also worked at Infosys Technologies Ltd in his earlier\nstint.<\/p>\n\n\n\n Currently, at the fund house, some of the funds which he manages include Kotak Infrastructure & Economic Reform Fund<\/a>, Kotak Bluechip Fund<\/a>, Kotak India Growth Fund Series 5<\/a>, Kotak Balanced Advantage Fund<\/a> and Kotak Equity Savings Fund<\/a>.<\/p>\n\n\n\n Mr\nArjun Khanna<\/strong> is a Bachelor of Engineering\n(Electronics) and has done his Master of Management (Finance) from Jamnalal\nBajaj Institute of Management Studies, Mumbai. He has received the Chartered\nFinancial Analyst designation from the CFA Institute.<\/p>\n\n\n\n Mr Khanna has over 11 years of experience\nout of which 10 years have been with Mutual Funds in Equity Research. Prior to\njoining Kotak Mahindra Mutual Fund, he was with Principal Mutual Funds. He has\nalso worked at Citibank in his earlier stint.<\/p>\n\n\n\n Some of the schemes that he manages at the fund house include Kotak Infrastructure & Economic Reform Fund<\/a>, Kotak Bluechip Fund<\/a>, Kotak Equity Hybrid<\/a>, Kotak Emerging Equity Scheme<\/a>, Kotak Equity Savings Fund<\/a>, Kotak Small Cap Fund<\/a>, Kotak Standard Multicap Fund<\/a>, Kotak Debt Hybrid Fund<\/a>, Kotak Equity Opportunities Fund<\/a>, Kotak Banking and PSU Debt Fund<\/a>,  Kotak Bond Short Term Plan<\/a>, Kotak Bond Fund<\/a>, Kotak Corporate Bond Fund<\/a>, Kotak Dynamic Bond Fund<\/a>, Kotak Money Market Scheme<\/a>, Kotak Credit Risk Fund<\/a>, Kotak Mahindra Liquid Scheme<\/a>, Kotak Low Duration Fund<\/a>, Kotak Medium Term Fund<\/a>, Kotak Savings Fund<\/a>, Kotak Mahindra Gilt Unit Scheme 98 \u2013 Investment Plan<\/a> Kotak Global Emerging Market Fund<\/a>, Kotak Global Emerging Market Fund<\/a>, Kotak US Equity Fund<\/a>, Kotak World Gold Fund<\/a>, Kotak Asset Allocator Fund<\/a>, and Kotak Balanced Advantage Fund<\/a>.<\/p>\n\n\n\n The outlook for Kotak Pioneer Fund:<\/strong><\/p>\n\n\n\n In an endeavour to achieve the stated\nobjective of the scheme, KPF will predominantly invest in companies which are\ncontinuously using innovative techniques and processes to keep up with the changing\neconomic environment and grow. <\/p>\n\n\n\n The primary aim is to tap potential gains\nthrough active management of the fund for the long term with adequate risk\nmitigation strategies used.:<\/p>\n\n\n\n Risk Control Measures for investment strategy:<\/li><\/ul>\n\n\n\n The fund will comply with the prescribed\nSEBI limits on exposure. Risk is monitored and necessary action would be taken\non the portfolio if required. Attribution analysis is done to monitor the under\nor over performance vis a vis the benchmark and the reasons for the same.<\/p>\n\n\n\n Risk Mitigation measures for\nportfolio volatility: <\/li><\/ul>\n\n\n\n The overall volatility of the portfolio\nwould be maintained in line with the objective of the scheme. The portfolio\nwould be adequately diversified across stocks within the broad theme to\nmitigate volatility. Volatility would be monitored on with respect to the\nbenchmark and peer set. <\/p>\n\n\n\n Risk mitigation measures for\nmanaging liquidity: <\/li><\/ul>\n\n\n\n The fund manager may keep some portion of\nthe portfolio in debt and money market instruments and\/or cash within the\nspecified asset allocation framework for the purpose of meeting redemptions.\nThe liquidity would be monitored and necessary action would be taken on the\nportfolio if required. Stock turnover is monitored at regular intervals.<\/p>\n\n\n\n But the fortune of the fund is closely\nlinked to the companies selected by the fund manager and his team. The\nconstruction of the portfolio would be a challenge, as the investment theme is\ndiversified across sectors, stocks and across geographies (35% allocation out\nof the total minimum 80% allocation to equity and equity-related securities of companies\nhaving pioneering innovations theme) as well. <\/p>\n\n\n\n In a current global and domestic slowdown,\nthe valuations don\u2019t justify the company earnings of Indian companies. And on\nthe global front there is a wave of Trump policies, US-China Trade War,\nupcoming presidential elections and going forward even India’s relation with\nthe US and rest of the world and delay in Brexit could weigh on the overall\nperformance of the equity markets.<\/p>\n\n\n\n Besides, \u201cPioneering Innovations\u201d focused\napproach typically has high representation to emerging technologies and\ncorrespondingly lower representation to companies that operate in old economy\nsectors like metals, thermal power, corporate banking, traditional FMCG,\ntraditional IT Services, etc. Phases where such sectors benefit (either due to\nmassive risk-off or significant change in government policy to revive sectors\nlike metals, thermal power, PSU banks etc) may witness under-performance for\nsuch an approach.<\/p>\n\n\n\n So, there is extreme high risk involved,\ndespite the good opportunities available for long-term growth. Hence do\nconsider the implications involved before investing in the Kotak Pioneer Fund\nas it is placed at the higher end of the risk-return spectrum.<\/p>\n\n\n\n Hence invest in a sectoral fund only if\nyou:<\/strong><\/p>\n\n\n\n Have an extremely high-risk\nappetite<\/li> Can stay invested for 7-10\nyears without getting perturbed<\/li><\/ul>\n\n\n\n [Read: <\/strong>Best SIPs To Invest in 2019<\/a>]<\/p>\n","protected":false},"excerpt":{"rendered":" In challenging times only a handful of companies manage to sustain growth because they continuously produce innovative process and systems that help them keep up with the changing times and become pioneers. Considering the current turbulent times, there are such companies that can become pioneers that utilize new forms of production, technology, distribution or processes…<\/p>\n","protected":false},"author":4,"featured_media":1208,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"cybocfi_hide_featured_image":""},"categories":[3],"tags":[],"_links":{"self":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts\/1207"}],"collection":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/comments?post=1207"}],"version-history":[{"count":5,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts\/1207\/revisions"}],"predecessor-version":[{"id":1214,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts\/1207\/revisions\/1214"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/media\/1208"}],"wp:attachment":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/media?parent=1207"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/categories?post=1207"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/tags?post=1207"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}