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Should You Invest In Mirae Asset Healthcare Fund? - Outside View by PersonalFN

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Should You Invest In Mirae Asset Healthcare Fund?
Jun 15, 2018

An open-ended equity scheme investing in healthcare and allied sectors.

Scheme Details of Mirae Asset Healthcare Fund

TypeAn open-ended equity scheme investing in healthcare and allied sectorsBenchmark IndexS&P BSE Healthcare Index
Min. Investment- Lump sum - Rs 5,000 and in multiples of Re 1 thereafterPlans 
  • Regular
  • Direct
- Additional purchase - Rs 1,000 and multiples of Rs 1 thereafter
- Systematic Investment Plan - Rs 1,000 and in multiples of Rs 1 thereafterOptions
  • Growth*
  • Dividend
    • Pay-out
    • Re-investment
*default option
Min. Redemption‘Any amount’ or ‘Any number of units’ as requested by the investor at the time of redemption requestExpense RatioUp to 2.25 %
Face ValueRs 10 per unit
Entry LoadNAExit Load1% if redeemed within 1 year from the date of allotment
Nil if redeemed after 1 year from the date of allotment
Issue Opens11-Jun-18Issue Closes25-Jun-18

Investment Objective of Mirae Asset Healthcare Fund*

The investment objective of the scheme is to seek to generate long term capital appreciation through investing in equity and equity related securities of companies benefitting directly or indirectly in Healthcare and allied sectors in India.

The Scheme does not guarantee or assure any returns.

*Source: Scheme Information Document

(Read: What You Should Read In A Scheme Information Document)

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Is Mirae Asset Healthcare Fund for you?

Mirae Asset Healthcare Fund (MAHF) is an open-ended thematic fund which will predominantly invest in equity and equity related instruments of the companies belonging to healthcare sector.

Being a thematic fund around 80% - 100% of its net asset allocation will be inclined towards the healthcare sector. Hence, the portfolio construction will be focussed.

Thematic Funds invest in stocks from one particular common theme. They are growth-oriented equity schemes that aim at capital appreciation by investing in a set of say 3-4 sectors that are closely related to one particular theme.

For example, healthcare funds will invest in equities of pharmaceutical companies, Hospitals & Diagnostics, Medical Equipment and so on.

At present valuations of pharma sector are cheap and with the potential upside it is expected to bounce back in the future. Over the last few years, pharma industry has been hit due to various reasons such as rising competition, FDA inspections and so on.

Investing in thematic/ sector funds exposes you to portfolio concentration risk. Hence, MAHF is suitable for investors with high-risk appetite- meaning those who can assume very-high risk in an anticipation of high returns in future.

Asset Allocation of Mirae Asset Healthcare Fund

The asset allocation of Mirae Asset Healthcare Fund under normal circumstances will be as under:

InstrumentsIndicative Allocation
(% of total assets)
Risk Profile
High/Medium/Low
MinimumMaximum
Indian Equities and Equity Related Securities of companies that are likely to benefit either directly or indirectly from Healthcare and allied sectors.*80100High
Other equities and equity related securities of companies in India.*020High
Money market instruments/debt securities, Instruments and/or units of debt/liquid schemes of domestic Mutual Funds020Low to Medium
*Equity and Equity related instruments include convertible debentures, equity warrants, convertible preference shares, equity derivatives etc. The Indian equities & equity related securities of companies includes those securities listed on stock exchanges in India and includes ADRs & GDRs.

Further it is stated in the offer document that:

  • The scheme can invest up to 50% of Net Assets of Scheme into equity derivatives instruments for the purpose of trading, hedging and portfolio rebalancing.
  • Investment in Securitized debt (excluding foreign securitized debt), if undertaken, would not exceed 20% of the net assets of the Scheme.
  • The Scheme may invest in repo/reverse repo in corporate bonds.
  • The scheme shall not engage in short selling, credit default swaps and securities lending and borrowing. The scheme shall not invest in any unrated debt instruments and derivatives. The scheme will not advance any loans. The scheme does not intend to invest in overseas / foreign securities. The Scheme does not intend to participate in stock lending.

(Source: Scheme Information Document)

Investment Strategy Of Mirae Asset Healthcare Fund

Being an open-ended thematic fund, the scheme will invest predominantly in equity and equity related instruments in the healthcare sector.

Equity Strategy

Being a healthcare fund, the fund manager will mainly focus on the healthcare sector.

The fund manager will analyse industry trends and business cycles in companies that benefit directly or indirectly from the Healthcare sector that may include companies from the Pharmaceutical, Healthcare, Hospitals & Diagnostics, Other Healthcare services, Research and/or Manufacturing Services, Distribution, Chemicals (Bulk, Specialty, Agrochemicals, Others), Medical Equipment, Insurance, Wellness, Nutrition, Hygiene, Health IT services, Financials and any other industry or services that directly or indirectly supports the pharma value chain.

Further, the fund may invest upto 20% of its net assets into equity and equity related securities of other companies.

It also has the flexibility to invest across market capitalization in portfolio companies within this theme. Moreover, the fund manager has the flexibility to follow a focussed approach for this theme. But the fund manager will try to have a large base of stocks in the portfolio to avoid concentration risk and liquidity risk.

To pick stocks and to build the equity portfolio, MAHF will majorly look at companies that have robust business models, enjoying sustainable competitive advantages as compared to their competitors and have high return ratios. The Fund Managers will also monitor the trading volumes in a particular stock before investment to avoid liquidity risk.

Debt Strategy

The fund while is mandated to invest around 0% - 20% of its net assets into debt and money market instruments, the investment team will primarily use a top down approach for taking interest rate view, sector allocation along with a bottom up approach for security/instrument selection.

The bottom up approach will assess the quality of debt security which will help in analyzing the the financial health of the issuer as well as the liquidity of the security.

As investments in debt instruments carry various risks such as interest rate risk, reinvestment risk, credit risk, liquidity risk and so on. The scheme aims to reduce this risk through diversification.

The credit quality of the debt portfolio will be maintained and monitored by MAHF using the fund house's in-house capabilities as well as inputs from external sources such as independent credit rating agencies.

Fund Managers for Mirae Asset Healthcare Fund

Mirae Asset Healthcare Fund will be jointly managed by Mr Vrijesh Kasera and Mr Neelesh Surana.

Mr Vrijesh Kasera has a professional experience of more than 10 years. He has an MBA (Finance), is a Chartered Financial Analyst (ICFAI), and holds a Master of Science in Finance from ICFAI University.

Prior to this assignment, he was associated with Axis Capital Ltd. as an Equity Research Analyst. Prior to joining Mirae Asset in 2016 he has also been associated with Edelweiss Broking Ltd.

Mr. Neelesh Surana is Head of Equities at Mirae Asset Global Investments (India) Pvt. Ltd.

Currently he is responsible for the managing existing equity funds of Mirae Asset (India), as well as, providing research support for the global mandate. He is an engineering graduate (B.E. -Mechanical) with MBA in Finance. He has over 18 years of experience in equity research and portfolio management.

Prior to Mirae, Mr Surana was associated with ASK Investment Managers Ltd., as Senior Portfolio Manager responsible for managing domestic and international portfolios.

Other Schemes managed by Mr Surana are Mirae Asset India Equity Fund, Mirae Asset Hybrid - Equity Fund, Mirae Asset Tax Saver Fund and Mirae Asset Great Consumer Fund.

Fund Outlook of Mirae Asset Healthcare Fund

Being a thematic fund, MAHF will assume very high risk. The fortune of the fund will be closely linked to the overall performance of the healthcare sector.

On evaluating the fund's objective and investment strategy, MAHF will have upto 100% exposure to equity and equity related instruments of companies that are likely to benefit either directly or indirectly from Healthcare and allied sectors. Hence, the undercurrents of the entire pharma/healthcare value chain will have a bearing on its performance while it MAHF endeavours to achieve its objective.

[Read: Why You Should Be Careful About Investing In NFOs]

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.

Disclaimer:

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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