Unifi Mutual Fund has launched the Unifi Flexi Cap Fund, its second New Fund Offer (NFO), which is open for subscription until May 30, 2025. This fund will adopt a flexi-cap investment approach, diversifying its assets across market capitalisations.
Its parent company, Unifi Capital has over two decades of experience in portfolio management services (PMS); the AMC aims to apply this expertise to its mutual fund offerings.
Investment strategy
The fund will select stocks from the large-cap, mid-cap, and small-cap segments, creating a diversified portfolio of 50–70 stocks. It will follow the Growth at a Reasonable Price (GARP) model, focusing on companies with a Price/Earnings to Growth (PEG) ratio of close to 1.5, a minimum return on equity of 15 per cent, and low debt. Strong corporate governance is also a key selection criterion.
Special situations is one of the primary criteria for identifying investment opportunities. The fund tracks companies undergoing control shifts, major buybacks, spinoffs, mergers, and demergers for potential upside. It also considers promoter buying and selling activity as an important indicator of business performance.
The fund’s portfolio will mainly comprise stocks from the Nifty 500. It will start by shortlisting 100–120 stocks through filters focused on earnings growth, sector leadership, and attractive valuations. It plans to target the top seven sectors, which represent about 70–75 per cent of the index, preferring to invest in the top five within each. It may allocate up to 20 per cent of the portfolio to emerging opportunities among the next 250 companies outside the Nifty 500. The allocation to large-caps will range between 40 and 75 per cent. Unifi’s investment philosophy emphasizes a 3–5 year holding period and it avoids cyclical sectors like metals, oil and gas, preferring consistent earnings growth stories.
The fund has enabling provisions to invest up to 35 per cent in overseas assets; however, it must wait for revised RBI limits, to actually use this mandate. There is currently a $7-billion industry-wide cap on overseas investments which has already been exhausted. Additionally, current regulations prohibit new AMCs from investing in global equities. A revision in this limit does not look very likely in the near term. The AMC has developed research capabilities in international equities, targeting sectors absent in India, such as global tech, luxury brands, and advanced aviation manufacturing.
PMS performance
Unifi Capital’s PMS division manages around ₹24,000 crore as of April 2025. Its flagship strategy, Blended-Rangoli, employs a flexi-cap approach by drawing from its seven other thematic strategies, which focus on themes such as corporate demergers, holding companies, increases in promoter holdings, value, strong consolidation, and the migration of market share from unorganised to organised players. According to PMSbazaar data, the strategy, launched in June 2017, has achieved a compounded annualised return of 19.7 per cent, outperforming its benchmark, the BSE 500 TRI, which returned 14.3 per cent as of April 30, 2025.
Another key strategy, BCAD (Business Consolidation After Disruption), targets consumer-facing sectors benefiting from rising incomes, financialisation, and GST-led formalisation. Since 2018, BCAD has returned a 14.7 per cent CAGR return, above its benchmark’s 14 per cent.
While the PMS track record of Unifi is encouraging, the flexi-cap category in mutual funds presents significant challenges, with only five out of 19 funds with longer track records successfully outperforming the respective benchmarks over a 10-year period. Hence investors can wait for the track record before investing in the fund.
Mainly selects stocks from Nifty 500
Special situations, a primary criterion to identify investment opportunities
Taking cues from promoter buying and selling patterns
Published on May 24, 2025