Edelweiss Select Midcap Fund

An open-ended Equity Scheme investing in midcap stocks.

Summary

Type	Open-ended Equity Scheme	Benchmark Index	BSE Midcap Index
Min. Investment	Rs 5,000(for lump sum) and in multiples of Rs 1 thereafter. Rs 500 (for monthly SIP, minimum 12 instalments)	Face Value	Rs 10 per unit
Add. Investment	Rs 1,000
Entry Load	Nil	Exit Load *	1%
Issue Opens	August 4, 2011	Issue Closes	August 18, 2011

* An exit load of 1.0% will be charged if redeemed or switched out on or before the completion of 1 year from the date of allotment of units.

Investment Objective*

The investment objective of the scheme is to, “generate long-term capital appreciation from a portfolio predominantly comprising of equity and equity related securities of mid cap companies”. However there is no assurance that the investment objective of the scheme will be realized and the scheme does not assure or guarantee any returns.

 

*Source: Scheme Information Document

Is this fund for you?

Edelweiss Select Midcap Fund (ESMF) is the first pure midcap fund from a relatively new fund house, Edelweiss Mutual Fund.

 

Edelweiss mutual fund is a trust sponsored by Edelweiss Capital Ltd. Edelweiss Asset Management Limited, a subsidiary of Edelweiss Capital Limited, acts as the Investment Manager to Edelweiss Mutual Fund. Edelweiss, as a fund house, follows the quant based approach of managing assets. “Quant based approach” aims to minimise the human errors involved in stock picking. In this model of portfolio management, mathematical and quantitative parameters are set and when the model signals buy or sell only then the fund manager will buy or sell stocks. It’s relatively a new concept in India with very few fund houses following it as of today. Under this model, the fund manager cannot buy any stock which is not a part of the model portfolio. In other words, any conviction which is not backed by numbers would not make its way in the portfolio.

 

ESMF too will follow the quant strategy. Fund would hold a well diversified portfolio of mid cap stocks without any sector bias. But by and large the fund will follow the market trend to avoid extreme underperformance. ESMF aims to invest in growth stocks that are available at reasonable valuations.

Portfolio & Investment Strategy

ESMF would follow a multi factor quantitative model portfolio. The model portfolio is build by filtering stocks from the selected investment universe on two parameters, fundamental and technical. Besides, rigorous risk management will ensure a good portfolio composition.

 

Fundamental parameters (The list is not exhaustive)

 

• Growth Factors such as sales growth, net profit growth
• Value Factors involve business evaluation



 

Technical Parameters (The list is not exhaustive)

 

• Trading volumes of the stock
• Free float Market capitalisation



 

The fund is mandated to allocate its assets as under:

 

Instruments	Indicative Allocation Range (% to Total Assets)		Risk Profile High/Medium/Low
	Minimum	Maximum
Equity and equity related instruments of companies falling in TOP 101 to 300th company by market capitalisation, listed in India	80	100	High
Equity and equity related instruments of other companies listed in India	0	20	High
Debt and money market securities	0	20	Low to Medium

(Source: Scheme Information Document)

Fund Manager Profile

Mr Paul Parampreet is one of the fund managers who will be responsible for managing ESMF. He has total work experience of 6 years and has to his credit a Bachelors Degree in Engineering (B.Tech.-IIT Kharagpur) and PDGM (IIM - C). Prior to joining Edelweiss Mutual Fund he associated with SDG India Pvt. Ltd., ICICI Bank and BG India Pvt. Ltd. Mr. Parampreet will manage the scheme jointly with Mr. Nandik Mallik.

 

Mr Mallik has the total work experience of 6 years and has to his credit a Bachelors Degree in Engineering (B.Tech.-IIT Kharagpur) and PDGM (IIM - C) and MS - Finance (London Business School). In the past, he has also worked with Credit-Suisse (London), BNP-Paribas (London), NM Rothschild (Mumbai) and Fair Isaac (FICO) (Bangalore).

Fund Outlook

Given the mandate of investing a dominant portion of ESMF’s assets in the mid cap space, the performance of the fund going forward would be closely linked to the stocks in the mid cap space. While present valuations of the Indian equity market are attractive for stock-picking in the mid caps, it is noteworthy that the present global economic turbulence (led by U.S. sovereign rating being downgraded and debt-overhang situation in the Euro zone) can elevate a chance of violent downside for the mid cap space (thus causing wealth erosion), whereby even the quant model may not be a saviour.

Remember: during the upside of the equity markets, mid cap do outperform the large caps, but they do not shy away from disappointing you turbulent times of the equity markets.

 

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Comments
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