NFO: ESG Equity Fund from Quantum Mutual Fund is open: Should you invest?

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Updated: June 24, 2019 3:33:44 PM

The selection of stocks within the 'ESG Equity Fund's portfolio will be restricted to only those stocks which meet the criteria of Environment, Social and Governance (ESG) of the fund house.

NFO, New Fund offer, mutual fund, MF, Quantum Mutual Fund, ESG Equity Fund,ESG parametersThe NFO of Quantum Mutual Fund’s ESG Equity Fund has opened on June 21, 2019, and will close on July 5, 2019.

Quantum Mutual Fund has come out with a New Fund Offer (NFO) of an open-ended equity mutual fund (MF) scheme titled ‘ESG Equity Fund.’ The NFO has opened on June 21, 2019, and closes on July 5, 2019, and its units will be available for continuous sale and repurchase from July 19, 2019.

The selection of stocks within the ‘ESG Equity Fund’s portfolio will be restricted to only those stocks which meet the criteria of Environment, Social and Governance (ESG) of the fund house. Chirag Mehta, Senior Fund Manager, Alternative Investments and Sneha Joshi, Associate Fund Manager, Alternative Investments are the joint fund managers of this scheme.

The fund will invest in companies that have scored on ESG parameters for which the fund house will use the data sources such as sustainability reports (GRI Framework), Business Responsibility Reports (BRR) and other publicly available documents.

As far as selection and picking of stocks and its weightage in the portfolio are concerned, this is what the fund house states – “Active weights of security within their respective sector will be determined by a composite ESG score. A higher ESG score of security within the sector will have higher relative weight and vice versa. The selection process ensures eliminating exposure to companies that rank poorly on ESG criteria completely. The sum total of the weights of securities in a sector will equal to track sector weights of broad well-diversified indices. The allocations focus on governance and sustainability; hence will be agnostic to valuations.”

The benchmark of ESG Equity Fund is Nifty 100 ESG Total Return Index, however, as per the fund house, “The Scheme’s performance may not be strictly comparable with the performance of the Benchmark, due to the inherent differences in the construction of the portfolios.”

In the ESG Equity Fund, the mandated minimum exposure to equities is 80 per cent while the maximum can go up to 100 per cent of the corpus while the maximum for Money Market Instrument can be 20 per cent of the total AUM of the fund. The Scheme offers both Direct Plan and Regular Plan with Growth option in both of them. The minimum investment is Rs 500.

Should you invest

ESG Equity Fund is a thematic fund but still diversified in nature. Although benchmarking is against Nifty 100 ESG Total Return Index, the fund’s portfolio will comprise of stocks from within the NSE 100 index. The Benchmark has nearly 65 per cent exposure to Financial Services, IT and Energy sector with Reliance, HDFC Bank, Housing Development Finance Corporation, Infosys, Axis Bank, Tata Consultancy Services as some of the top ones with maximum weights. The actual weightage for the scheme may, however, vary and can be seen only once the scheme portfolio is declared during the continuous sale of the units.

If investing in this scheme doesn’t help in diversification and rather gives exposure to the same set of stocks or industries, it may not help much. Else, one may take limited exposure and wait for the fund to show its performance in line with its theme before increasing any exposure.

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