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Name of the Scheme Kotak Pioneer Fund Scheme TypeAn open ended equity scheme investing in pioneering innovations theme NFO PeriodOctober 9 – October 23, 2019 |
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| Investment Manager Kotak Mahindra Asset Management Company Limited |
Face Value Rs. 10 |
| Fund Manager Mr. Harish Krishnan will be the Fund Manager for the Scheme. Mr. Arjun Khanna will be the Dedicated Fund Manager for investments in foreign securities. |
Minimum Application Amount During NFO: Initial Purchase (Non SIP): Rs. 5000/- (Plus in multiple of Re. 1 for purchase and for Rs. 0.01 for switches) SIP Purchase: Rs. 1000/- (Subject to a minimum of 6 SIP installments of Rs. 1000/- each) During Continuous Offer: Initial Purchase (Non SIP): Rs. 5000/- and in multiples of Rs. 1 for purchases and for switches. Additional Purchase (Non-SIP): Rs. 1000/- and in multiples of Rs. 1 for purchases and Re. 0.01 for switches. SIP Purchase: Rs. 1000/- (Subject to a minimum of 6 installments of Rs. 1000/- each) |
| Benchmark The performance of the Scheme is measured against 85% IISL Kotak India Pioneering Innovations Index + 15% MSCI ACWI Information Technology Index. The values of the customized benchmark so calculated, shall be disclosed at least on a quarterly basis on AMC website. The Trustees reserves right to change benchmark in future for measuring performance of the Scheme. |
The investment objective of the scheme is to generate capital appreciation from 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 However, there is no assurance that the objective of the scheme will be realized.
The asset allocation under the Scheme, under normal circumstances, is as follows:
| Investments | Indicative Allocation | Risk Profile |
|---|---|---|
| Equity and Equity related securities of companies having pioneering innovations theme* | 80 – 100 % | Medium – High |
| Equity and Equity related securities of companies other than having pioneering innovations theme | 0 – 20% | Medium – High |
| Debt & Money Market instruments | 0 – 20 % | Low – Medium |
| Units issued by REITs and InvITs | 0 – 10 % | Medium – High |
*The scheme may invest upto maximum of 35% in units of overseas Mutual Fund Schemes / ETFs with similar investment objective or strategy / Foreign securities# having pioneering innovation theme.
#The Scheme will invest upto a maximum of 35% of its net assets in foreign securities as specified in the SEBI circular – SEBI/IMD/CIRNo.7/104753/07 dated September 26, 2007 and any subsequent amendments thereto specified by SEBI and/or RBI from time to time. Scheme may invest in GDRs/ADRs including overseas markets in GDRs/ADRs, overseas equity, bonds and mutual funds and such other instruments as may be allowed under Regulations from time to time.
- Equity Derivatives – The Scheme may also use various derivative and hedging products from time to time in a manner permitted by SEBI to reduce the risk of the portfolio as and when the fund manager is of the view that it is in the best interest of the of the unit holders. The maximum equity derivative position will be 50% of the equity component. The cumulative gross exposure through equity, debt, units of REITs & INVITs and derivative positions will not exceed 100% of the net assets of a Scheme.
- The scheme may also use fixed income derivatives instruments subject to guidelines as may be issued by SEBI and RBI from time to time.
- The scheme is allowed to lend securities subject to a maximum of 50%, in aggregate, of the net assets of the Scheme and up to 50% of the net assets of the Scheme in the case of a single intermediary.
- The scheme may invest in securitized debt upto 50% of the debt allocation.
- The scheme may invest in another scheme of the Kotak Mahindra Mutual Fund or any other Mutual Fund without charging any fees, provided that aggregate inter-scheme investment made by all schemes under the management of Kotak Mahindra Asset Management Company Limited or in schemes under the management of any other asset management company shall not exceed 5% of the net asset value of Kotak Mahindra Mutual Fund.
- The scheme shall participate in the corporate bond repo transactions and in accordance with extant SEBI/RBI guidelines and any subsequent amendments thereto specified by SEBI and/or RBI from time to time. The gross exposure of the scheme to repo transactions in corporate debt securities shall not be more than 10% of the net assets of the concerned scheme.
- The Scheme may invest in listed/unlisted equity shares as per the extant SEBI (Mutual Funds) Regulations, 1996 and amended by SEBI from time to time. The scheme may also invest in listed/unlisted and/or rated/unrated debt or money market securities, provided the investments are within the limits indicated in the asset allocation pattern. Investment in unrated debt securities is made with the prior approval of the Board of the AMC, provided the investment is in terms of the parameters approved by the Board of the Trustee. Where the proposed investment is not within the
Portfolio Rebalancing:
Subject to SEBI (MF) Regulations, the asset allocation pattern indicated above may change from time to time, keeping in view market conditions, market opportunities, applicable regulations and political and economic factors. These proportions may vary depending upon the perception of the Fund Manager, the intention being at all times to seek to protect the interests of the Unit holders. In case of any deviation, the AMC will achieve a normal asset allocation pattern in a maximum period of 30 days. Where the portfolio is not rebalanced within 30 Days, justification for the same shall be recorded in wiring. The Investment Committee shall decide on the course of action. However, at all times the portfolio will adhere to the overall investment objective of the Scheme.
The investment objective of the scheme is 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 process which are likely to significantly challenge existing markets and value networks, displace established market operators, products and/or business models.
Definition of Pioneering Innovations as a theme:
The underlying investment philosophy of this fund would be to invest in such companies that have the potential to bring in sustained higher growth and change the competitive business environment due to their ability to:
- Produce a new thing (a new product/service) or
- A New way of making a thing (a New Process) or
- A New way of using a Thing (New consumer Value or behavior)
- A New way of reaching out to Customer either by disintermediating intermediaries or leveraging technology
- A technological innovation which results into new or improved product or service to the consumer
The fund seeks to invest in such companies, that utilize technological and/or procedural ability to operate and create large value for customers, government, and society by way of either time savings, cost savings, enable better engagement or make them more productive.
Such pioneering companies are typically uninhibited in utilizing new technologies within their field of operation; adapt new and audacious strategies; may be indifferent to their size vis-à-vis the competition; and many a times would not even be classifiable as an operant in any particular sector or market cap segment. The business activity of such companies creates competitive advantage which proves to be difficult for the competitors to surmount, meet or replicate.
The pioneering companies can also utilize existing technologies and provide mundane services but their method, or their product or their business model makes them a peculiar and a potentially pioneering player within their business segment. Thus given India's developing status, we may see early disruption cycle and a resultant investment opportunity, even in mundane sectors and businesses, which otherwise may be considered as sunset sectors in developed nations. As an example, the domestic equity portfolio may invest in companies that are creating or utilizing patents, processes or products that will disrupt the business of their competitors. Or such companies that have developed new process to manufacture an old molecule, metal, car, building etc.
Likewise, this fund will consider such companies to be pioneering that bring new technology/materials/processes that disrupt the way the things are manufactured, or services are being rendered, or new ways are being found that may delight the customers.
This fund would also seek to invest in such companies that may be servicing, or partnering or may be benefitting from the pioneering companies, globally and/or in overseas mutual funds investing in such companies.
The fund would also seek to invest in unlisted equities of companies as permitted from SEBI from time to time that are in line with the said theme and may be operating to disrupt the competitive landscape of the Indian industry.
Through the mutual funds route, this fund will seek to invest in global funds that invest in companies inventing or utilizing innovative technologies such as, but not limited to, artificial intelligence, cloud computing, robotics, energy renewables, energy storage, advanced materials, 3D printing, autonomous and near autonomous vehicles, internet of things, knowledge work automation, nanotechnology, advanced genomics, augmented reality, advanced energy exploration and distribution, mobile internet etc.
The portfolio construction will be based on thematic and a balanced approach between top-down and 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.
Risk Control Measures:
- Risk Control Measures for investment strategy: The fund will comply with the prescribed SEBI limits on exposure. Risk is monitored and necessary action would be taken on the portfolio if required. Attribution analysis is done to monitor the under or over performance vis a vis the benchmark and the reasons for the same.
- Risk Mitigation measures for portfolio volatility: The overall volatility of the portfolio would be maintained in line with the objective of the scheme. The portfolio would be adequately diversified to mitigate volatility. Volatility would be monitored on with respect to the benchmark and peer set.
- Risk mitigation measures for managing liquidity:
The fund manager may keep some portion of the portfolio in debt and money market instruments and/or cash within the specified asset allocation framework for the purpose of meeting redemptions. The liquidity would be monitored and necessary action would be taken on the portfolio if required. Stock turnover is monitored at regular intervals.
Portfolio Turnover:
Given the nature of the scheme, the portfolio turnover ratio may be high and AMC may change the portfolio according to asset allocation, commensurate with the investment objectives of the scheme. The effect of higher portfolio turnover could be higher brokerage and transaction costs.
Turnover means simple average of the aggregate of purchases and sales net of the above exclusions. These purchases and sales invite transaction costs viz. Securities Transaction Tax, brokerage,custodian transaction charges, etc.
Portfolio Turnover Ratio:
Not Applicable (Since the scheme is a new fund to be launched, the said ratio is Not Applicable)