In a constantly changing world, success belongs to those who welcome new ideas and innovation. This principle extends beyond the realm of technology and permeates every facet of our lives, from healthcare and finance to education and entertainment. Recognising this transformative power, when it comes to mutual funds, several fund houses have launched thematic offerings based on innovation. This kind of opportunity allows investors to take advantage of companies that are shaping the future.
Investing for Tomorrow, Today
Innovation based thematic offering is an equity fund with a clear focus. The aim is to generate long-term capital appreciation by investing in companies and assets poised to benefit from innovation-driven strategies and themes by the portfolio companies.
As a result, the portfolio will consist of a diverse range of sectors, from cutting-edge technology and renewable energy to emerging fields like artificial intelligence and biotechnology.
Over the past decade, it has been observed globally that companies who have innovated consistently have delivered more returns than other traditional companies.
An Offering with a Vision
Such type of offerings’ investment philosophy primarily hinges on identifying companies demonstrating a strong commitment to innovation. This includes factors like:
■ Research and Development Intensity: Companies with significant investments in research and development are more likely to develop groundbreaking products and services, pushing the boundaries of their respective industries.
■ Intellectual Property (IP) Strength: Robust patent portfolios and proprietary technologies act as a competitive advantage, ensuring long-term market dominance.
■ Adaptability and Agility: The ability to quickly adapt to changing market dynamics and embrace new technologies is crucial for success in an ever-evolving landscape.
■ Disruptive Potential: Companies with the potential to disrupt existing markets and create entirely new ones hold immense promise for future growth.
By focusing on these key characteristics, the fund managers will curate a portfolio of high-conviction stocks with the potential to deliver superior returns over the long term.
Idea Potential
At a time when technology-related developments are rapidly changing thanks to the widespread integration of artificial intelligence (AI) across industries, the upcoming few years will ensure there will be enough developments to keep everyone around on toes.
Overall, in India, innovation as a theme is receiving tremendous government policy support. Initiatives like Start-Up India, Digital India, new IPR policy, etc. are all aiming to support innovation like never before. As countries look to become increasingly self-sufficient in terms of resources, the theme may do well going forward globally and domestically.
In the meanwhile, there will be opportunities through which investors can tap into these technologies via the listed companies. However, it is important to remember that investing in a thematic fund like this comes with inherent risks.
The focus on a specific theme like innovation can lead to higher volatility compared to broader diversified funds. Additionally, the success of the fund hinges heavily on the fund manager’s ability to accurately identify and invest in the right companies.
Given this setup, such an offering is best suited for investors with a highrisk appetite and a long-term investment horizon of ideally five years or more. So, if you are an investor seeking exposure to the exciting world of innovation and its potential to reshape the future, then adding an innovation theme-based fund in your portfolio presents a compelling proposition.
It is crucial to carefully assess your risk tolerance and investment goals before embarking on this investment journey. In conclusion, innovation-based thematic fund offers investors a chance to capitalise on the immense potential of innovation.
While it comes with inherent risks, the typical portfolio’s focus on high-conviction stocks makes it a compelling option for investors with a high-risk appetite and a long-term investment horizon.
