Widely read:
हिंदी में भी पढ़ें 
SBI Innovative Opportunities Fund NFO (new fund offer) is the third thematic and sectoral fund being launched by the country's largest fund house, SBI Mutual Fund , this year.
The SBI Innovative Opportunities Fund NFO opened for subscription on July 29, 2024, and will remain open until August 12, 2024.
SBI Innovative Opportunities Fund NFO at a glance
| NFO period | July 29 to Aug 12, 2024 |
| Benchmark | Nifty 500 TRI |
| Fund manager(s) | Prasad Padala and Pradeep Kesavan |
| Exit load | If the units are redeemed within one year from the date of allotment: 1 per cent of the applicable NAV. Nil thereafter. |
| Tax treatment |
If units are sold within a year, capital gains will be taxed at 20 per cent.
If units are sold after one year, capital gains are taxed at 12.5 per cent. However, gains of up to Rs 1.25 lakh are tax-exempt. |
About SBI Innovative Opportunities Fund
SBI Innovative Opportunities Fund is a thematic fund. As the name suggests, it will invest in companies that are at the forefront of innovation. Essentially, the fund will look at companies focusing on the following three areas: i) product or service innovators, ii) process innovators and iii) innovative adopters.
Simply put, they will look for companies that:
-
Allocate a significant portion of revenue to research and development (R&D).
-
Implement practices that reduce costs and improve efficiency.
- Show agility in adapting to new technologies or business models.
While the fund currently has an investment universe of around 100 stocks, it aims to have a portfolio of around 35-40 stocks with a bottom-up selection framework.
The fund can also allocate 35 per cent of its net assets to international equities. However, the current SEBI limits prohibit it from investing in foreign stocks.
Performance of other innovation-based funds
None of the 10 innovation funds has a long-term track record of at least five years. In fact, half of them were launched just last year, so there's little evidence of how effective this theme is in the long run.
The short-term performance has also been uninspiring. Of the five funds with a 12-month track record, only one ( ICICI Prudential Innovation ) has managed to beat its benchmark Nifty 500 TRI's 39.28 per cent.
Innovation funds' one-year performance
The benchmark returns were 39.28 per cent, which means four of the five funds have underperformed
| Scheme | 1Y return (in %) |
|---|---|
| Axis Global Innovation FoF | 22.17 |
| Axis Innovation | 37.3 |
| DSP Global Innovation FoF | 19.98 |
| ICICI Prudential Innovation | 56.52 |
| Kotak Global Innovation FoF | 16.65 |
| Note: Returns as of July 31, 2024. Direct plans considered. | |
SBI Innovative Opportunities Fund managers
Prasad Padala and Pradeep Kesavan will oversee the SBI innovation fund.
Padala worked as an equity analyst at the fund house from September 2017 to August 2023 and as an external consultant handling equity research from August 2023 to February 2024. He holds an MBA from IIM Ahmedabad and a B Tech from IIT Madras. He is also a Charter holder of the CFA Institute, USA.
Meanwhile, Kesavan has 18 years of experience in the financial services sector and joined the fund house in July 2021.
Our take
Although innovation funds aim to invest in companies at the cutting edge of technology, some of their top holdings include ICICI Bank , Info Edge , Linde India , Zomato , Interglobe Aviation , and Infosys .
These are some of the well-known companies in the country. In fact, diversified funds such as flexi-cap and multi-cap funds invest in such companies as well. In addition, these funds have historically been steadier than thematic and sectoral funds from a long-term perspective.
Moreover, innovation funds are a new bunch of funds. They have yet to undergo a five- to seven-year market cycle, so we need to know how they fare during market booms and busts.
However, if you are keen to ride the innovation theme, we suggest you allocate at most 5-10 per cent of your money to the SBI Innovative Opportunities Fund.
Also read: Ask these three questions before investing in an NFO
New episodes every Friday
