30 October 2024
Get the latest issue of Outlook Business
In the rapidly evolving financial landscape, innovation emerges as a guiding light towards growth and transformation. The introduction of the Bandhan Innovation Fund marks a significant step in this direction, positioning itself as a crucial entity poised to leverage this potential. This article delves into the essence of innovation within the financial sector, outlines the fund’s distinctive investment strategy, and offers a thorough analysis for prospective investors.
Unleashing Innovation Potential
Innovation is defined as the practical application of ideas resulting in the launch of new or improved goods or services. In a developed economy, the success of innovation is evident when observing market indexes.
Success of Innovation in A Developed Economy
While looking at the markets, Nasdaq which reflects innovative companies across various sectors, has outperformed the diversified index S&P 500 over the long term. NASDAQ generated 35X returns in 34 Years vis-à-vis S&P 500 showed 14X returns during the period.
(Source: Bloomberg. Nasdaq Composite Index and S&P 500 Index data are shown for the period Dec 1989 to Jan 2024). *
Characteristics Of High Innovation Companies
The below characteristics usually lead to the company having a high Price to Book valuation as there is a higher weight of intangible value vs physical assets.
- Differentiated product or service
- Non-linear business model – not very dependent on resources
- High R&D expense
- High per employee cost
- Network effect
Innovation can not only happen in technology but is spread across most industries like Finance, Chemicals, Retail, Healthcare, Auto etc. E.g.: An Indian financial services company which started as a brick-and-mortar enterprise, rapidly changed to a digital platform, to augment its scale with constant innovation and investment in technology.
Bandhan Innovation Fund: A Closer Look
Bandhan Mutual Fund announced the launch of the Bandhan Innovation Fund. The scheme will open for public subscription on April 10, 2024, and will close on April 24, 2024. Bandhan Innovation Fund launch marks a pivotal moment in investment strategies aimed at harnessing innovation.
It is structured around a clear investment framework, identifying and investing in three categories of innovators: Leading Innovators, Rising Innovators, and Emerging Innovators. This strategic classification enables the fund to capture value across the innovation spectrum, from established disruptors to nascent trailblazers.
Leading Innovators: Companies that are consistently researching and disrupting with new ideas, technologies, and strategies, setting new standards, and defining the business landscape are “Leading Innovators”.
Rising Innovators: A “Rising Innovator” characterizes a company that leverages innovation to acquire a competitive advantage in a reasonably mature industry.
Emerging Innovators: Emerging Innovators are innovation-aspiring companies and may be in the early stages of transforming their business models.
Investment Philosophy and Review
As a thematic equity scheme under the innovation category, the Bandhan Innovation Fund is tailored for aggressive investors bullish on innovation. With a minimum investment threshold and an open-ended structure, the fund aims for long-term capital appreciation by
investing in equity and equity-related securities of innovative companies. The investment philosophy is clear-cut: to explore opportunities across the innovation theme, ensuring diversified exposure to top-performing companies within this domain.
Investment Considerations
For aggressive investors with a keen interest in innovation and a high tolerance for risk, the Bandhan Innovation Fund presents a relatively attractive opportunity. However, before making any investment decision, consulting a financial advisor is recommended to ensure the fund aligns with your investment objectives, risk profile, and financial goals. The dynamic nature of innovation requires a discerning approach to investment, one that balances the promise of relatively high returns with the inherent risks.
In Conclusion
The Bandhan Innovation Fund stands as a testament to the transformative power of innovation in the financial sector. By strategically investing in a mix of leading, rising, and emerging innovators, the fund aims to offer investors a unique pathway to participate in the next wave of financial growth. With careful consideration and expert guidance, investors can navigate this relatively high risk and high reward landscape, potentially reaping the benefits of innovation-led growth. This relatively high risk and high reward landscape, potentially reaping the benefits of innovation-led growth.
Disclaimer
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
