Equity has survived the test of time, often emerging as a preferred investing option for investors over a long run. But what about in times of economic adversity? A plethora of events ranging from world market crashes, global pandemics, government and policy change, can have the effect of rattling the economy, albeit temporarily. Its these adverse, special times that call for a more specialised investment approach.
In our earlier blog, Can adversity present an investment opportunity?, we saw how thematic category of mutual funds, which focus on investing in companies experiencing special situations can be used to seek opportunities in such times of adversity.
Introducing Aditya Birla Sun Life Special Opportunities Fund - an open-ended equity scheme following Special Situations theme. The investment objective of the scheme is to provide long term capital appreciation by investing in opportunities presented by special situations such as corporate restructuring, Government policy change and/or regulatory changes, companies going through temporary but unique challenges and other similar instances.
How does the scheme intend to achieve its core objective?
The scheme has a strategic approach in its investing strategy intended to achieve its objective of capitalising on special opportunities, which includes:
A focused portfolio of 35-40 stocks with an active management philosophy so as to take advantage of arising opportunities
Bottom up approach for stock selection – focussing on attributes of a specific stock such as the potential of opportunity it presents, prospect of future growth and available margin of safety.
A ‘Price-Target’ approach aimed at investing in and holding stocks till they achieve a specific pre-determined price
What kind of special situations does this scheme cater to?
The special situations can be affecting the entire global or domestic economy or can be limited to a specific industry or company. These can include - regulatory policy changes that can favour certain industries, corporate restructuring that can boost growth of companies, global and domestic economic events that can impact companies across several industries.
Each special situation is unique and can result in a unique investing opportunity.
What kind of opportunities are sought out?
The scheme seeks out investment opportunities that have the potential for long term growth and scalability. Such opportunities may present itself in several ways including:
Low valuations – adverse situations can lead to stock market crashes, often due to knee jerk reaction of several investors. In such situations there may be several stocks that are thus undervalued vis-à-vis their fair value. Fund managers in this scheme seek out such stocks available at low valuations that have the potential for upside.
E.g.: Several stocks in airline and retail industries have fallen considerably in wake of the pandemic that has hit these industries hard. As the economy and demand recovers, fundamentally strong stocks in these sectors can regain their true value.
Emergence of new sectors – adversity often changes business models and business trends. This can give rise to new sectors which have potential for growth in the years to come.
E.g.: The pandemic has given way to a new way of work and life – with work from home and learn from home becoming the new norm, robust stocks in the digital space can have the potential to grow; companies manufacturing domestic self-help appliances can see growth potential in times where self-sufficiency is becoming the new norm.
Re-rating opportunities – Lack of demand and sales can result in downgrade in rating of several stocks. As situations normalise and demand regrows, these stocks have the potential to get positively re-rated and may have a subsequent increase in their valuations.
Why should you as in investor invest?
Potential for reasonable return
The core of this scheme is to capitalise on opportunities with an aim for long term growth. Its objective and robust investment strategy has the potential to provide investors with reasonable returns over long term.
Unique investing strategy
This scheme is characterised by a unique investing strategy that is tailor made to seeking out opportunities in adverse or favourable special situations. This scheme can add diversity to your existing portfolio.
Expert fund management
This scheme is managed by expert fund managers who are constantly studying the economy and markets - tweaking portfolio holdings as price targets are achieved or opportunities arise. Such active and expert fund management is unlikely to be matched by an individual investor.
Applicable to a wide range of situations
While this scheme can very much be applicable in times of a global pandemic that we are facing today, the economy is no stranger to times of adversity – from times of war and conflict to demonetisation to global financial crisis. Even positive regulatory changes or corporate restructuring can give rise to opportunities. Opportunities are almost always available. It is a matter of seeking them out – which is the core of this scheme.
Who can invest?
Suitable for investors who have a high-risk appetite and are looking for capital appreciation through long term investments (at least 5 years or more).
The times today are opportune and as an investor you could seek out investment avenues for growth. Leave this to the experts and aim to invest in Aditya Birla Sun Life Special Opportunities Fund today.
For further information on the scheme, please refer to the SID/KIM of this scheme.
The mentioned sector(s)/stock(s)/issuer(s) are for illustration purpose only and not intended as advise. The sector(s)/stock(s)/issuer(s) mentioned above do not constitute any research report/recommendation of the same and the Scheme may or may not have any future position in these sector(s)/stock(s)/issuer(s).
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.