 "Mutual funds (MFs) managed a record Rs 66.2 trillion in assets during the July-September quarter, marking a 12.3 per cent increase over the previous three-month period — the highest quarterly jump in MF assets in at least five years.")
Illustration: Binay Sinha
WhiteOak Capital Mutual Fund on Friday launched a new thematic fund called ‘WhiteOak Capital ESG Best-in-class Strategy Fund’, an open-ended equity scheme that invests in companies following the Environment, Social and Governance (ESG) theme.
The NFO opens on 11 October and closes on 25 October 2024.
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What is the fund about?
The NFO will invest in companies with superior corporate governance practices. The fund seeks to derive returns for its clients by investing in high-quality businesses which have long-term sustainability of return on capital, potential scalability of the business, strong execution capability and superior corporate governance culture.
“Historically, Nifty100 ESG TRI has out-performed Nifty 100 TRI in 11 out of 14 financial years. (including FYTD 2025). The growth rate for Nifty100 ESG TRI since April’11 to September’24 has been 14.6% CAGR Vs 13.7% CAGR for Nifty 100 TRI. However, the Nifty100 ESG TRI has under-performed Nifty 100 TRI over last 3 years. (Past performance may or may not be sustained in the future.),” the company said in a release.
“In DCF (Discounted Cash Flow) models, typically more than 80% of the value comes from the terminal value. Projecting growth into the future and assigning significant exit growth rates, multiples, and terminal value all assume sustainability and longevity of business, which one suspects can’t come at the cost of damaging the environment, disregarding societal imperatives, and short-changing minority shareholders. Poor ESG practices pose a risk to business longevity and hence reduce terminal value”,” said Aashish Somaiyaa, CEO of WhiteOak Capital Asset Management Limited.
The fund will utilize its proprietary framework to assess companies on their corporate governance practices.
“Under this framework, companies are prominently assessed based on their accounting practices, alignment with minority shareholders’ interests, capital allocation, board strength and compliance with the relevant laws and regulations,” said Ramesh Mantri, CIO of WhiteOak Capital Asset Management.
Based on this assessment, companies are ranked internally between one to twelve, with companies with rank one being the most well-governed companies and companies with the twelfth rank being the least well governed.
The Scheme will consider companies ranked first to fourth under its proprietary framework as its investment universe.
Within the investment universe, the fund will invest in businesses with attributes such as superior returns on incremental capital, scalable long-term opportunity, strong execution, etc., which are available at an attractive valuation i.e. the current market price is at a substantial discount to intrinsic value.
As per SEBI Guidelines, the Scheme shall only invest in securities that have Business Responsibility and Sustainability Report (BRSR) disclosures. The Fund will use a SEBI Registered third-party, ESG Ratings Provider for Ratings Reports, and other research to aid the decision-making process.
The scheme will invest at least 65% of its assets under management ( AUM) in companies which are reporting on comprehensive BRSR and are also providing assurance on BRSR Core disclosures. The balance AUM of the scheme can be invested in companies having BRSR disclosures.
The fund will be managed by Ramesh Mantri (Equity), Trupti Agarwal (Assistant Fund Manager, Equity), Dheeresh Pathak (Assistant Fund Manager, Equity), and Piyush Baranwal (Debt).
Who should invest in such an NFO?
Value Research believes investors should be wary of ESG funds because fund companies like to invent themes to confuse customers and make it easier to sell mediocre funds. Basic marketing wisdom dictates that the sellers try and differentiate their products as much as possible. Therefore, fund companies typically describe the investment approach of their funds as being unique. “This is an attempt to de-commoditise the fund – the fund company is now able to claim that the fund should be evaluated only by its own declared characteristics and not by comparing it to any other fund,” said Dhirendra Kumar of Value Research.
“As far as you – the investor – is concerned, there is no need for any fund company to have more than five funds. These should be one conservative and one adventurous equity fund, one liquid fund, one income fund and one equity-income hybrid. There can be tax-saving variants of the equity and hybrid funds, but all of the investors’ needs can be taken care of by these five types. The actual fund category names can vary with regulatory requirements, but these types of mutual funds can fulfil all actual savings and investment needs of any individual investor,” said Kumar.
Portfolio allocation:
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The fund portfolio allocation will include Equity & Equity related Instruments of companies following Environment, Social and Government (ESG) theme adopting Best-In-Class Strategy: 80% -100%, Equity & Equity related Instruments of other companies. 0-20%, Debt Securities and Money Market Instruments. -
0-20% and units issued by REITs and InvITs. -
Under Best-In-Class strategy, the Scheme shall invest in companies and issuers that perform better than peers on one or more performance metrics related to ESG matters. The Scheme shall invest under ‘other equity & equity related instruments’ in accordance with the Best-in-Class strategy followed by the scheme.
First Published: Oct 11 2024 | 3:21 PM IST
