Baroda BNP Paribas has launched a value fund that will start offering from the 17thth May 2023. The Baroda BNP Paribas Value Fund is an open-ended mutual fund scheme that follows the value investment strategy. In this strategy, the fund invests in undervalued stocks that are likely to grow its capital over the long term.should i invest Baroda BNP Paribas Value Fund New Fund Offer (NFO)What are the various risk factors associated with such funds?
Baroda BNP Paribas Value Fund NFO – Issue Details
Learn more about NFOs here.
| scheme opens | May 17, 23 |
| the scheme ends | May 31, 23 |
| Schemes for continuous purchases/sales are reopened | Within 5 business days |
| Minimum lump sum | 5,000 rupees |
| Minimum SIP | 500 rupees for 6 months |
| NAV of the fund | 10 rupees during NFO period |
| entry road | Nothing |
| end of load | For units over 10% of the investment amount, 1% will be charged for redemption within 365 days. |
| dangerous | very high risk |
| standard | nifty 500 try |
| fund manager | Mr Shiv Chanani |
| Maximum TER | 2.25% |
Baroda BNP Paribas Value Fund SID
What is the investment objective of this MF scheme?
The scheme aims to generate long-term capital growth primarily from a diversified portfolio of equities and equity-related products by following a value investment strategy.
There is no assurance that the investment objectives of this scheme will be realized.
What is the allocation pattern of this mutual fund?
The investment pattern of this fund is as follows:
| instrument type | minimum% | maximum% | risk profile |
|---|---|---|---|
| Stocks or stock-related products of the entire market capitalization | 65% | 100% | high risk |
| Debt and money market securities | 0% | twenty five% | low to medium |
| Units issued by REITs and INvITs | 0% | Ten% | medium to high |
| Unit of investment trust scheme | 0% | Ten% | medium to high |
Why invest in Baroda BNP Paribas Value Fund NFO?
Investing in value mutual funds has several advantages.
1) Higher Earning Potential: Value funds aim to invest in undervalued stocks and may generate higher returns once the market recognizes their true value. Buying an asset at a discounted price can increase in value over time and can lead to significant profits.
2) Focus on fundamental analysis: Value investing focuses on analyzing fundamental company characteristics such as earnings, assets and cash flow. This approach focuses on the underlying value and financial health of the companies under consideration, thus providing a stronger foundation for investment decisions.
3) Long-term view: Value mutual funds typically have a long investment horizon. This approach is consistent with the philosophy that eventually the market will recognize the value of undervalued stocks, leading to potential price appreciation over time. Long-term investments reduce the impact of short-term market fluctuations and increase your chances of achieving your investment goals.
4) Lower volatility: Value stocks tend to be more stable and less volatile than growth stocks, which are likely to be more speculative in nature. This reduced volatility provides a smoother investment experience and allows investors to remain committed to their long-term investment strategy.
5) Potential Downside Protection: Value investing focuses on buying stocks at discounted prices and can provide a level of downside protection during market downturns. The safety margin inherent in value investing helps mitigate significant losses and provide a more resilient portfolio in challenging market conditions.
Important risk factors to consider before investing in such funds
While there are benefits to investing in value mutual funds, there are also some potential drawbacks to consider.
1) Long-term poor performance: Value strategies can underperform over extended periods, especially during market cycles when growth stocks are favored. This may test an investor’s patience and may result in lower returns compared to other investment approaches.
2) Limited exposure to high-growth sectors: Value funds tend to focus on mature, established companies with stable earnings and low growth rates. This approach may limit our exposure to high-growth sectors and innovative companies that may offer significant future returns.
3) The value trap: Identifying undervalued stocks can be difficult and risk falling into value traps. While these stocks look cheap, there are potential problems and poor prospects that could keep prices low or even lower. Thorough analysis and research are required to avoid investing in such value traps.
4) Limited Diversification: Some value mutual funds may have concentrated portfolios, meaning they hold relatively few stocks. Lack of diversification can increase investment risk as the overall performance of the fund can be highly dependent on a small number of major holdings.
5) Potential Recession Value Trap: Economic downturns can lead to more undervalued stocks, but they can also create value traps. In times of economic crisis, companies facing significant challenges may look cheap, but they are plagued with underlying problems and may not be a good investment choice.
6) Full risk factors for investing in this scheme can be found in the SID/KIM/NFO prospectus.
Value Mutual Fund Historical Performance
Below is a quick snapshot of the performance of existing funds in this category. (annualized return)
| scheme name | 1 year | 3 years | 5 years | 10 years |
|---|---|---|---|---|
| ICICI Prudential Value Discovery Fund | 16% | 35% | 15% | 19% |
| JM Value Fund | twenty one% | 32% | 13% | 16% |
| Templeton India Value Fund | 20% | 41% | 12% | 15% |
| Japan India Value Fund | 12% | 32% | 12% | 16% |
| UTI Value Opportunity Fund | 11% | 27% | 12% | 13% |
| Bandhan Sterling Value Fund | 14% | 45% | 12% | 18% |
| HSBC Value Fund | 17% | 33% | 12% | 19% |
| Tata Equity PE Fund | 17% | 27% | Ten% | 18% |
| HDFC Capital Builder Value Fund | 13% | 30% | Ten% | 16% |
| Quantum Long Term Equity Value Fund | Ten% | 27% | 9% | 12% |
| Indiables Value Fund | Ten% | twenty five% | 7% | – |
| Aditya Birla Sunlife Pure Value Fund | 14% | 31% | Five% | 17% |
| Union Value Discovery Fund | 13% | 28% | – | – |
| IDBI Long Term Value Fund | Ten% | 26% | – | – |
Baroda BNP Paribas Value Fund NFO – Should You Invest?
The Baroda BNP Paribas Value Fund invests based on a value investment strategy, namely investing in undervalued stocks.
There are pros and cons to investing in value mutual funds.
On the positive side, value funds tend to offer higher return potential as they focus on undervalued stocks. We also offer a long-term, disciplined investment approach.
However, the downsides include the potential for underperformance over an extended period of time, as the market may take time to recognize the value of your chosen stock. Additionally, value investing requires patience and research skills to identify truly undervalued opportunities.
If you don’t want to test with a new value fund, you can invest in some of the existing value funds that have proven performance.
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Suresh KP is the founder of Myinvestmentideas. He is his NISM Certified – Investment Advisor and he is a NISM Certified – Research Analyst. He has been analyzing financial markets for the past 20 years. He can be reached at suresh@myinvestmentideas.com.
