Innovation funds: High-risk bets that are apt for seasoned investors

Failure rates among innovators tend to be high; concentrated portfolios make these funds volatile

- SARBAJEETKSEN

Innovative companies can grow at a pace that their traditional rivals cannot match. To capture the growth of such companies, several mutual fund houses have in recent times launched innovation-themed schemes that invest only in such trailblazers.

Bandhan Innovation Fund is the most recent entrant into this category.

"Currently, the innovation theme is gaining prominence. India's global innovation rank has improved from 81 to 40 over eight years (2015-2022).

Bandhan Innovation Fund seeks to capitalise on advancements in fields such as retail, industrials, fintech, auto, etc. by investing in innovation-driven growth companies," says Manish Gunwani, head-equity, Bandhan Asset Management Company (AMC).

Mutual fund houses like ICICI, Nippon India, Baroda BNP Paribas, UTI, and Union are already offering innovation-themed schemes. Kotak, DSP, and Axis provide fund-of-funds that invest in global innovation-focused schemes.

Innovation schemes invest at least 80 per cent of their money in shares of companies having a robust framework.

innovation What works in their favour? The government's emphasis production-linked on incentives, pro-growth regulations, and support for the startup ecosystem are expected to benefit companies that invest in innovation.