The fund house refers to ‘special situations’ as unique situations that the companies may face from time to time, viz. regulatory, consolidation in the industry, increased competition, change in management, unfavourable business cycle, macroeconomic picture, etc. that can be turned in opportunities.

Types of special situations

(Source: Product Brochure)

It is ultimately the way a fund manager perceives these scenarios and devises an investment strategy that decides the Scheme’s success. Usually, a bottom-up approach is followed to construct a portfolio of a ‘special situations’ fund, wherein companies are identified by performing thorough fundamental analysis. And the portfolio of a ‘special situations’ scheme, generally, is market cap and sector agnostic.

IPIOF as per the mandate will invest 80-100% of its net asset in equity & equity related instruments of special situations theme, up to 20% in other equity and equity related instruments, and up to 20% in debt, units of mutual fund schemes, money market instruments, and cash & cash equivalents.

From a risk standpoint, given the portfolio skew to equity, particularly to the ‘special situations’ theme, IPIOF is a high-risk contender and thus suitable only for investors who have a high-to-very high-risk appetite and an investment time horizon of at least 5 years.

[Read: Why Comparing Returns to Risk Is More Meaningful!]

From a tax implication standpoint, IPIOF will be classified as an equity-oriented mutual fund scheme. Hence, if redeemed within a holding period of one year, Short Term Capital Gain Tax (STCG) tax @ 15% will apply. And if redeemed after a period of 1 year, the Long Term Capital Gains (LTCG) in excess of Rs 1 lakh will be taxed @10%.

Table 1: NFO Details

Type	An open-ended equity scheme	Category	Thematic – special situations
Investment Objective	To generate long-term capital appreciation by investing in opportunities presented by special situations such as corporate restructuring, Government policy and/or regulatory changes, companies going through temporary unique challenges and other similar instances. However, there can be no assurance or guarantee that the investment objective of the scheme would be achieved.
Min Investment	Rs 5,000 and in multiples of Re 1 thereafter	Face Value	Rs 10 per unit
Plans	• Direct • Regular	Options	Growth* Dividend (Reinvestment & Payout) *Default option
Entry Load	Not Applicable	Exit Load	1% of applicable Net Asset Value - If the amount sought to be redeemed or switch out is invested for a period of up to twelve months from the date of allotment Nil - If the amount, sought to be redeemed or switch out is invested for a period of more than twelve months from the date of allotment
Fund Manager	Mr Sankaran Naren; and Roshan Chutkey	Benchmark Index	Nifty 500 Index
Issue Opens	December 26, 2018	Issue Closes:	January 09, 2019

(Source: Scheme Information Document)

How will the Scheme allocate its assets?

Under normal circumstances, the Scheme will allocate its assets as follows:

Table 2: IPIOF's Asset Allocation

Instruments	Indicative Allocation (% of Total Assets)		Risk Profile
	Minimum	Maximum	High/Medium/Low
Equity & Equity related instruments of special situations theme.	80	100	High
Other equity and equity-related instruments	0	20	Medium to High
Debt, Units of Mutual Fund schemes, Money market instruments, Cash & Cash Equivalents	0	20	Low to Medium

(Source: Scheme Information Document)

Further, it’s mentioned in the offer document that the Scheme may also take exposure to:

• Derivative instruments to the extent of 50% of net assets

• ADR/GDR/ Foreign Securities to the extent of 50% of net assets.

• Securitised debt upto 50% of the debt portfolio

• Stock lending up to 20% of net assets

The cumulative gross exposure to equity, debt and derivatives positions will not exceed 100% of the Net Assets of the Scheme. Also, it will not engage in short selling and repos in corporate bonds.

What will be the Investment Strategy?

To achieve its stated investment objective, IPIOF will follow a blend of value and growth style of investing. For portfolio construction, the Scheme will adopt a bottom-up approach to stock-picking.

Special situation opportunities

(Source: Product presentation)

The Scheme will invest in stocks with an emphasis on opportunities presented by special situations such as corporate restructuring, Government policy and/or regulatory changes, companies going through temporary unique challenges and other similar instances.

Furthermore, the Scheme intends to use derivatives for purposes that may be permitted by SEBI Mutual Fund Regulations from time to time. Derivatives instruments may take the form of Futures, Options, Swaps or any other instrument, as may be permitted from time to time and the fund managers will deploy a combination of derivative strategies.

IPIOF may also invest in Debt and Money Market Securities/Instruments. The Scheme aims to identify securities which offer an optimal level of yields/returns, considering risk-reward ratio.  With an aim to control risks, rigorous in-depth credit evaluation of the securities proposed to be invested in will be carried out by the risk management team of the AMC.  For credit evaluation, the Scheme will study the operating environment of the issuer and the short as well as long-term financial health of the issuer. The Scheme will invest in investment grade debt securities as rated by a credit rating agency.

In addition, the investment team of the AMC will study the macroeconomic conditions, including the political, economic environment and factors affecting liquidity and interest rates. This analysis would be used in an attempt to predict the likely direction of interest rates and position the portfolio appropriately to take advantage of the same.

The Scheme may invest in other schemes managed by the AMC or in the schemes of any other Mutual Funds in terms of the prevailing Regulations.

Who will manage ICICI Prudential India Opportunities Fund?

IPIOF will be managed by the duo, Mr Sankaran Naren and Mr Roshan Chutkey. The overseas investment of the Scheme will be managed by Ms Priyanka Khandelwal.

Mr Sankaran Naren is the Chief Investment Officer (CIO) and the Executive Director (ED) at the fund house. He is instrumental in overall investment strategy development, execution, and oversees the entire investment function.

He has to his credit a B. Tech degree from IIT Chennai and an MBA (in Finance) from IIM Kolkata.

Mr Naren has rich experience of around 28 years in almost all spectrum of the financial services industry ranging from investment banking, fund management, equity research, and stock broking operations. He is a leading voice on the Indian economy/ equity markets across the investment and financial services fraternity.

At ICICI Prudential Mutual Fund, Mr Naren manages ICICI Prudential Large & Mid Cap Fund, ICICI Prudential Balanced Advantage Fund, ICICI Prudential Business Cycle Fund, ICICI Prudential Multi-Asset Fund, ICICI Prudential Equity Savings Fund, ICICI Prudential Smallcap Fund, ICICI Prudential Infrastructure Fund, ICICI Prudential R.I.G.H.T Fund, ICICI Prudential Technology Fund, ICICI Prudential Value Fund, ICICI Prudential Equity & Debt Fund, ICICI Prudential Long Term Wealth Enhancement Fund, ICICI Prudential Bharat Consumption Fund, ICICI Prudential Multicap Fund, and ICICI Prudential Long Term Equity Fund (Tax Saving) among a few others.

Mr Roshan Chutkey joined ICICI Prudential Mutual Fund in February 2015. Prior to that, Mr Chutkey worked with Estee Advisors in F&O Research, Kuwait Financial Centre in Macroeconomic Research, Fund of Funds management, with Citibank in risk management, and JP Morgan Chase in Equity Research.

He has to his credit a B. Tech degree from Chennai, an MBA from IIM Lucknow, Masters in Finance from London Business School, and is a Chartered Financial Analyst. Mr Chutkey will co-manage IPIOF along with Mr Naren. Currently, at the fund house, Mr Chutkey also manages ICICI Prudential Banking & Financial Services Fund.

Ms Priyanka Khandelwal, as mentioned earlier, will manage the overseas investments of the Scheme. She joined ICICI Prudential Mutual Fund in October 2014 and has to her credit a bachelor’s degree in commerce (B.Com), plus is a Chartered Accountant and Company Secretary by qualification. At present, Ms Khandelwal also manages ICICI Prudential US Bluechip Equity Fund and ICICI Prudential Global Stable Equity Fund.

The Outlook for ICICI Prudential India Opportunities Fund:

The coming year, 2019, would be challenging for Indian equities. Some of the key factors that will influence Indian equities is GDP growth (which seems to have lost momentum of late), India Inc.’s earnings growth, how international crude oil prices move, the inflation trajectory,   union budget 2019 announcements, the outcome of Lok Sabha elections, impact of farm loan waiver and increased MSP (Minimum Support Price) on fiscal deficit, and the global macroeconomic and geopolitical backdrop. It will not be an easy year for wealth creation and volatility will be obvious.

How the fund manager spots opportunities in these challenges while playing the ‘special situations’ theme remains to be seen. The fortune of the IPIOF will be closely linked to how well the fund manager and his team assess the scenarios and risk management measures they adopt.

To read PersonalFN’s view, click here.

[Read: Are You Still Looking For The Popular Funds Out There? Read This!]

PS: PersonalFN’s special report 5 Undiscovered Funds may help you invest in equity funds without taking any undue risk.

These undiscovered funds, recommended in the report, have passed through a stringent scheme selection criteria set by PersonalFN.

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2. Neither QIS, it's Associates, Research Analyst or his/her relative have any financial interest in the subject Company;

3. Neither QIS, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one per cent or more securities of the subject Company, at the end of the month immediately preceding the date of publication of the research report;

4. Neither QIS, it's Associates, Research Analyst or his/her relative has any other material conflict of interest at the time of publication of the research report except that QIS (PersonalFN) is, as per SEBI (Mutual Funds) Regulations 1996, an associate / group Company of Quantum Asset Management Company Private Limited and Trustees and Sponsor of Quantum Mutual Fund (QMF) and to that extent there may be conflict of interest while recommending any schemes of QMF. However, any such recommendation or reference made is based on the standard evaluation and selection process, which applies uniformly for all Mutual Fund Schemes. The payment of commission (upfront / annualized & trail), if any, for any Schemes by QMF to QIS (PersonalFN) is also at arm's length and as per prevailing market practices.

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