These MFs are allocating big money to IPOs | Economic Times

Mutual funds have been betting big on IPOs in the last couple of months. The last quarter has seen big-ticket IPOs hitting the market. Some mutual fund houses have gone big on these IPOs while many others have stayed away from them. According to data, several mutual fund schemes allocated around 10-19% of their AUM to the IPOs. These schemes range from thematic to small and mid cap funds. Here's a look at the schemes which invested the most in IPOs and whether it is a good thing for mutual fund investors. Mutual fund advisors believe that during every bull run there are a lot of IPOs that hit the markets and investors always look for making fast money by listing gains. However, many times retail investors do not have the awareness or proper guidance to go about the IPO allocation. Secondly, investors might end up booking losses if they do not understand the company and its balance sheet well. So, if you are interested in IPOs and have the risk appetite but not the required knowledge, these schemes can be helpful. "IPO might be an easy way to ride the newer businesses which deny traditional valuation systems. I believe that instead of riding the IPO market on your own, it makes sense for retail investors to go through such funds. Hence, aggressive funds making IPO allocations is not a bad thing. In this case, the fund manager will have an exit strategy. This is very important because in a downward market we have seen most of the IPOs give negative returns," says Raj Talati, Founder, ABM Capital, a financial planning firm based in Vadodara. According to Edelweiss Alternate Research, mutual funds invested nearly Rs 6,000 crore in four initial public offerings (IPOs) in July. They invested Rs 4,448 crore in Zomato, Rs 1,083 crore in GR Infra, Rs 210 crore in Tatva Chintan Pharma, and Rs 142 crore in Rolex Rings.85446738Source: ScripboxMutual fund experts believe that investments in IPOs are not wrong until it matches the investment strategy of the fund. He adds that if investors are investing in a small cap or a thematic fund, then good IPOs can make fitting additions to the portfolio. “IPOs should not be looked as a separate category. They are stocks. As long as the stocks in the fund (irrespective of whether they are via IPO or not) satisfy the mandate and investment style of the fund, and there are no major concerns on the fundamentals, management, and valuations, investors need not worry,” says Arun Kumar, Head of research, Funds India. However, if you want allocation to IPOs and want to bet on them in a bigger way, you can’t wait for these schemes to take allocation to the IPOs. If you don’t want to directly go for IPOs, you can invest in schemes like- Edelweiss Recently Launched IPO fund. Read more: Missed allotment in IPO listings? Try participating via Edelweiss Recently Listed IPO FundFinancial planners say that investors shouldn’t believe that allocation to IPOs mean better returns in schemes. “It doesn't guarantee that fund managers will always go right with their calls, but at least they are in a better situation to evaluate and analyse the data and take an exit whenever required,” says Raj Talati.