All you need to know about IDFC midcap opportunities fund

Each mutual fund, whether debt or equity, relies on an underlying asset to create returns. Mid-cap funds invest in the equities of mid-sized firms as their underlying asset. This means that the money invested in mid-cap funds is utilised by fund managers to acquire stocks of mid-sized firms that have the potential to provide positive returns over the long term.

Performance of mid-cap funds

Over the last year, midcap funds have fared exceptionally well. The reopening of the economy following the Covid wave resulted in a robust revival of demand across industries.

Along with a recovery in demand, most midcaps have maintained a clean balance sheet and good operating cashflows during the down cycle. Finally, the market decline in March offered a window of extremely acceptable values for midcaps, resulting in a robust comeback in pricing.

The value research data shows that the mid-cap funds have given a return of 56%, 15.56%, and 14.64% over one, three, and five-year periods as on 26th August, 2021.

Recently, IDFC mutual fund filed a draft with Sebi to announce its plan to launch an IDFC midcap opportunities fund. This mid-cap fund is an open-ended equity scheme primarily will invest in mid-cap stocks.

Management strategy

The fund aims to generate long-term capital appreciation by investing in equities and equities-linked securities of the mid-cap segment. The scheme is benchmarked against S&P BSE Midcap 150. The fund’s equity portion would be handled by the fund manager Sachin Relekar, and the debt portion by the fund manager Harshal Joshi.

What should investors know?

-There is no entry load; however exit load of 1% is chargeable if redeemed or switched out within one year from the date of allotment.

-The scheme offers both a regular plan and a direct plan.

-The scheme’s maximum total expense ratio permissible by the Sebi is up to 2.25%.

-The scheme falls under the ‘Very High’ risk category, and investors should consult their advisers to check the product suitability.

-Minimum application amount is Rs 5,000 and in multiples of Rs 1 thereafter.

-The management is yet to announced the date of this NFO.

Endnote

Midcaps are a segment of business that contains large prospective caps, implying that the scope and potential for returns can be substantial. While investing in midcaps, investors must keep in mind that they may experience periods of volatility.

Further, you should have a longer time horizon of around five years and invest using systematic investment plans. During periods of volatility, one might take advantage of the chance to invest in lump sums. Wealth is created over time, and hence maintaining an investment in a high-quality fund is critical. One needs to begin by examining the fund’s rating and track record of performance consistency.