NFO review: ITI Pharma and Healthcare Fund

On October 18, 2021, ITI Mutual Fund rolled out a new fund offer (NFO) that will provide exposure to the pharma and healthcare theme. The newbie, ITI Pharma and Healthcare Fund, will be benchmarked to the NIFTY Healthcare Index and is the sixth pharma and healthcare fund being launched after the outbreak of the COVID-19 pandemic.

The scheme will close for subscription on November 01, 2021, and will be managed by Pradeep Gokhale and Rohan Korde.

About the strategy
The scheme aims to give investors exposure to companies in the healthcare field, such as pharma, hospitals, medical devices and supplies, laboratories and diagnostics, medical insurance, etc.

"The covid-19 pandemic has given a new thrust to the Indian pharma sector. ITI Pharma and Healthcare Fund is confident of offering a unique investment experience to its investors by adopting diligent and research-backed investment processes. The fund house follows the investment philosophy of SQL - Margin of Safety, Quality of the business and Low Leverage and offers a superior investment experience to its investors," said George Heber Joseph, Chief Executive Officer and Chief Investment Officer, ITI Mutual Fund.

We compared the NIFTY Healthcare Total Return Index with that of the NIFTY 50 Total Return Index to see how this strategy has worked vis-à-vis the broader market (see the chart 'The Nifty Healthcare Index vis-à-vis the Nifty 50'). Over the last decade, while the healthcare index initially outperformed the broader market with a higher degree of outperformance, the growth momentum fizzled out from 2016 to 2019. A similar trend can be seen in its long-term performance (based on five-year rolling returns), where the healthcare index turns out to be far more volatile than the mainstream Nifty 50 index. But these are historical trends, and one cannot extrapolate them to the future.

Healthcare-themed funds
Currently, there are 14 healthcare-oriented funds with a collective AUM of over Rs 16,400 crore spread across 11 AMCs. Of these, nine are actively managed funds that manage about Rs 16,000 crore. The majority of these funds are benchmarked against the S&P BSE Healthcare Total Return Index. The oldest healthcare fund was launched by UTI Mutual Fund in June 1999, while the fund managed by Nippon Mutual Fund manages the highest assets in the category worth over Rs 5,400 crore.

The Nifty Healthcare Total Return Index is used as a benchmark by just three other passively managed funds (ETFs) apart from the newbie fund being launched by ITI. None of them were launched more than a year back.

About the fund manager
Pradeep Gokhale, Senior Fund Manager & Head of Research, has been associated with ITI Mutual Fund for about three years. He has over 23 years of extensive experience in Fund Management, Equity Research, Credit Evaluation, and Ratings. He is currently managing all the equity mutual funds of the fund house along with their balanced advantage fund.

Rohan Korde, Fund Manager at ITI Mutual Fund, currently manages ITI Value Fund.

About the AMC
ITI Mutual Fund is one of the minor players of the mutual fund industry. Apart from the new fund they have come up with, the fund house currently offers 13 funds across equity, debt, and hybrid categories with no presence in the passive space.

In the actively managed equity space, the fund house manages assets worth over Rs 1,500 crore across six funds. Since all their equity funds have been launched in 2019 or later, none of them are currently rated as per the Value Research Rating system.