These two mutual fund houses launch special opportunities funds: Should you invest?

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WhiteOak Capital Mutual Fund and SAMCO Mutual Fund have announced special opportunities funds to capitalise on market dynamics and special situations. While WhiteOak’s NFO is already open, SAMCO’s new fund offer (NFO) is set to open on Friday, May 17, 2024.

Special Opportunities Funds are designed to harness specific market scenarios such as corporate restructuring, regulatory changes, technological disruptions, emerging trends, and other similar instances.

These funds aim for long-term capital appreciation by identifying undervalued or overlooked opportunities.

WhiteOak Capital Special Opportunities Fund

WhiteOak Capital’s offering seeks to generate long-term capital growth by focusing on special situations like mergers, acquisitions, government policy changes, and technological innovations.

Aashish Somaiyaa, CEO of WhiteOak Capital Asset Management emphasised the importance of active management in identifying undervalued stocks and leveraging bottom-up stock selection strategies.

Ramesh Mantri, CIO of WhiteOak Capital Asset Management highlighted the fund’s objective to capitalise on temporary disruptions in stock prices.

“This presents buying opportunities for investors,” Mantri said.

The fund adopts a bottom-up approach to stock selection, aiming for potential alpha generation by maintaining a high active share.

SAMCO Special Opportunities Fund

SAMCO’s offering is built on a proprietary DISRUPTION model consisting of ten distinct sub-strategies.

This model enables the fund to systematically uncover special situations across various themes such as digitization, regulatory reforms, innovation, and emerging sectors.

Viraj Gandhi, CEO of SAMCO Mutual Fund, emphasised the fund’s flexibility, allowing it to pivot across sectors and themes to capture emerging trends.

Umeshkumar Mehta, CIO of SAMCO Mutual Fund, highlighted the tax efficiency and diversification advantages of the SAMCO Special Opportunities Fund.

By managing thematic investments internally and diversifying across sectors and themes, the fund aims to minimise tax implications and mitigate risk concentration.

Investment considerations

Special opportunities funds represent thematic equity schemes with significant flexibility across market capitalisation and sectors.

Unlike many flexicap schemes that exhibit considerable overlap with their benchmarks, special opportunities funds provide diversification benefits to investors.

By incorporating such a fund in their portfolio, investors can enhance diversification and potentially mitigate risk.

However, analysts caution that the high flexibility enjoyed by fund managers in this category may lead to portfolio overlapping with other schemes in the portfolio.

Investors should evaluate their existing holdings to ensure optimal allocation.

Currently, there are three existing funds in this space.

Here are the returns of the existing special opportunities funds:

Fund 3-year return (CAGR in %) 5-year return (CAGR in %)
ICICI Prudential India Opportunities Fund 28.9% 23%
Franklin India Opportunities Fund 28.5% 23.9%
ABSL Special Opportunities Fund 17.7%

(Source: Value Research)