Asset management firms pursue Special Opportunities funds amid market dynamics

Asset management firms: Recent filings with the Securities and Exchange Board of India (Sebi) reveal a surge in interest among asset management firms towards special opportunities funds, with three companies—WhiteOak Capital, Kotak Mahindra, and Samco—submitting draft papers during March-April.

Special Opportunities Funds, previously categorised under Category I of Alternative Investment Funds (AIFs), are now gaining traction among mutual fund houses seeking to diversify their offerings and attract a broader investor base.

These funds aim to capitalise on unique market situations, including regulatory changes, management restructuring, technological disruptions, and temporary operational challenges faced by companies, sectors, or entire economies.

According to Feroze Azeez, Deputy CEO of Anand Rathi Wealth Ltd, special situation funds target mispriced stocks, presenting opportunities for investors amidst market fluctuations.

Manuj Jain, Co-Head of Product Strategy at WhiteOak Capital AMC, highlights the distinctive nature of these funds, noting significant variations in the top 10 holdings compared to benchmark indices and flexi cap funds.

While special opportunity funds carry a certain level of risk, they are particularly appealing to long-term investors comfortable with potential volatility, Jain adds.

As mutual fund houses explore thematic investing to introduce innovative fund options, special opportunity funds emerge as a strategic avenue for growth and diversification within the industry.

With asset management firms increasingly embracing these specialised funds, investors are presented with new avenues for portfolio diversification and potential long-term growth opportunities.

(with PTI inputs)