NFO Alert: PGIM India Large & Mid Cap Fund

The universe is vast and so is the world of investment. If you are planning to start your investment journey, several options await you in the market. The popularity of the stock market is increasing every day and everyone wants to invest but due to a lack of proper guidance and financial awareness, a retail investor always carries a fear of loss of funds.

Here comes into the picture, Mutual Funds. A Mutual Fund is an investment product through which a retail investor can invest indirectly into shares and different asset classes and their investment will be managed by a team of professional fund managers.

If you’re new to the Mutual Funds world, then checkout our blog: Mutual Funds: Meaning, Types, Features, Benefits and How They Work.

Today we will introduce you to the most commonly used jargon in the Mutual Fund Industry ‘NFO’ or New Fund Offer.

What is an NFO?

A New Fund Offer (NFO) signifies the introduction of a new mutual fund scheme by an Asset Management Company (AMC) to the market, available for subscription by both retail and institutional investors. The primary objective behind launching an NFO is for the AMC to gather capital for purchasing securities to establish the fund’s portfolio.

NFOs can be subscribed for a fixed period. Once the duration of subscribing to NFO closes, the fund can be easily sold and bought by the general public (in case of open ended funds) and the NAV allotted for the same fluctuates as per the market movement.

The Risks associated with an Investment in NFO

1. The NFO doesn’t have any track record therefore you cannot track its previous performance.
2. The fund manager’s capabilities are also a parameter that should be kept into consideration before investing in an NFO because the performance of the fund manager can be checked in the fund returns after a particular period, which is not available in an NFO.
3. The performance of NFOs is generally unpredictable as they need time to establish themselves and show good returns.

PGIM Asset Management Company

Before we delve deeper into the details of PGIM Large & Mid Cap Fund NFO, let us give you an overview of PGIM AMC.

PGIM stands for Prudential Investment Management India. It is a global investment firm of US-based Prudential Financial Inc.

The AMC offers a wide range of 20 open-ended funds that are managed by thirteen professional fund managers. PGIM also offers Portfolio Management Services (PMS) and Alternative Invest Funds (AIF). PGIM India Mutual Fund has a presence across 27 cities in the country.

Details of the NFO

PGIM has launched NFO in the Large & Mid Cap category. The large & mid-cap category of mutual funds refers to a category in which a minimum investment of 70% of assets is required into Equity with a minimum of 35% in large-cap stocks and 35% in mid-cap stocks because large & mid cap funds are considered a blend of stability and growth. Larg-cap is considered as safer and gives you consistent returns whereas mid-cap provides higher returns.

Note: Risk in mid-cap is comparatively higher than large-cap securities.

In April 2019, the AUM of large & mid-cap funds across the industry was around 47,833 crores and as per the data of October 2023, the AUM of large and mid-cap funds stood at 1,87,575 crores. So, a growth of 4x was seen in just 4.5 years!

There are a total of 29 actively managed large & mid-cap funds available in the industry.

Why invest in large & mid-cap funds?

1. Growth Potential – The large and mid-cap mutual funds category offers higher growth potential to investors as compared to the large-cap mutual funds category.
2. Flexibility – The Fund manager has the flexibility to choose between mid-cap and large-cap stocks depending on market conditions.
3. Broader Representation – The large and mid-cap fund category has a broader representation of the market segment.
4. Diversification – Diversification of your portfolio among large and mid-cap stocks helps the investor mitigate the risk associated with mutual funds.

Why you should not invest in large & mid-cap funds?

1. Absence of small-cap stocks – Large & mid-cap funds do not have much exposure to small-cap stocks. This may cause the fund to earn lower returns during bull runs as historically, small cap index has earned higher returns than large and mid-cap indices.
2. Lower flexibility as compared to Flexi Cap funds – Since large and mid-cap funds have been mandated to have at least 35% exposure to large and mid-cap stocks, flexibility to exit a downward trending market is limited. This may lead to higher losses as compared to flexi cap funds, which do not have any such conditions.

Who can invest in Large & Mid Cap Funds?

1. Investors who are looking to diversify their portfolio can opt for large & mid-cap funds.
2. Large and mid-cap funds are also suitable for investors who wish to reap the benefit from the growth of both large and mid-cap stocks.
3. Investors who have an investment horizon of more than 5 years can also opt for these funds, should their risk profiles allow it.

Fund Managers and their Stock Selection Approach

The fund will be managed by 5 different fund managers named

• Mr. Vinay Paharia (Equity)
• Mr. Anandha Padmanabhan Anjeneya (Equity)
• Mr. Utsav Mehta (Equity)
• Mr. Puneet Pal (Debt)
• Mr. Ojasvi Khicha (Overseas Investment)

Fund managers of PGIM large and mid-cap stocks choose companies with a market cap greater than 1000 Crore to build their stock portfolio. Also, their stock selection strategy includes investing in IPOs. Additionally, the company must have a good track record of capital allocation.

Fund Facts

1. Date of Issue of NFO – 24^th Jan 2024
2. Closing Date of NFO – 7^th Feb 2024
3. Type of Scheme – It’s an open-ended large and mid-cap equity scheme.
4. Investment Objective – The objective of this fund is to provide long-term capital growth through investment in equity-related instruments.
5. Plan/Option – Payout of Income Distribution cum capital withdrawal option Reinvestment of Income Distribution cum Capital Withdrawal Option and Growth Option.
6. Minimum Investment – Minimum 5000/- for lumpsum and 1000/- for SIP.
7. Purchase and Switch in – Minimum 5000/- and multiples of Rs 1 thereafter.
8. Additional Purchase – Minimum 1000/- and in multiples of Rs 1 thereafter.

7. SIPs – Minimum of 5 instalments with an amount of Rs 1000/- each and in multiple of Rs 1 thereafter.
8. Exit Load – If you exit before 90 days of unit allotment. You are liable to pay an exit load of 0.5% and NIL after that.
9. Benchmark Index* – Nifty Large Mid Cap 250TRI

*Benchmark refers to a base with which the performance of the fund is compared.

Conclusion

There is no doubt that large and mid-cap funds have greater potential in terms of return as compared to solely large-cap funds but they generate an extra return on the cost of higher risk.
Therefore, before making any investment choice it is always suggested to consult your financial advisor. Also, assess your investment horizon and risk profile.

Frequently Asked Questions (FAQs)

Q1. What is going to happen once I invest in NFO during its subscription period?

Ans. The fund house will receive your invest and then use it to actively manage stocks in the large and mid cap category with the objective to seek long term capital growth.

Q2. Units of NFO will be allotted in how many days?

Ans. The units of NFO will be allotted within 5 days after the closure of the subscription period.

Q3. Is there any lock-in period in PGIM India Large & Mid Cap Fund if not, then how long should I stay invested?

Ans. No, there is no lock-in in PGIM India Large & Mid Cap Fund but the fund house recommends a tenure of at least 5 years as the ideal time to stay invested in the mutual fund.

Q4. What is the base NAV of any NFO?

Ans. The base NAV of NFO is Rs 10 but the NAV of a mutual fund unit is derived from the value of the underlying securities and the accumulated profits since scheme launch.

Q5. Is SIP allowed in NFO and how much do I need to pay monthly?

Ans. Yes, you can do an SIP in NFO and you can start an SIP in this mutual fund with just Rs. 1000.

Disclaimer: The securities, funds, and strategies mentioned in this blog are purely for informational purposes and are not recommendations.