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Kotak pioneer fund can generate alpha for sophisticated investors

Mumbai: Decades ago, legendary investor Philip Fisher had made ‘investing in innovation’ almost into an art form, and his concentrated portfolio of stocks had a fair share of ideas – and revenue streams – that belonged very much to the future.

That appears to be the investment philosophy of the money managers at Kotak Pioneer Fund, which is seeking to generate alpha from a portfolio of companies that are pioneers in their respective fields – and have ‘innovation moats’ to protect new lines of business from existing competition. Conversely, these innovators are also tipped to dislodge current cash cows, upending existing business models and generating long-term returns.

The new fund offer is currently open and closes for subscription on October 23. The scheme, which will be managed by Harish Krishnan, notes that business models are changing rapidly and companies that pioneer and adapt to change are more likely to succeed in the future.

Considering this, the fund will look at building a portfolio of companies that seek to benefit from newer forms of production, technology, distribution or processes that are likely to challenge existing markets or value networks, and displace established market leaders, or bring in novel products and business models.

In doing so, it will follow a multicap approach, and build a portfolio of primarily large cap and mid cap companies that are innovators and pioneers, with sustainable growth potential and evident competitive advantage.

The fund also has the mandate to go beyond India, and will invest up to 35% in overseas funds/ETFs/securities investing in similar themes. The global portion will be invested through the fund of fund route into the CI Signature Global Technology Fund.

Wealth managers believe this is a sophisticated product and would not suit all classes of investors.

“Investors looking to generate alpha from a portfolio of innovators and diversify overseas could look at allocating some money to such a fund,” said Nisreen Mamaji, founder, Moneyworks Financial Advisors.

Distributors believe this product is not for first-time investors who should focus instead on building a mutual-fund portfolio based on their risk profile and long-term goals.

“First-time investors starting off their investment journey should stick to a portfolio of diversified equity mutual funds, with a long track record,” said S Shankar, a financial planner at Credo Capital.

Source: Economic Times