AMCs eagerly pursue special opportunities funds; 3 firms file draft papers with Sebi

Special Opportunities Funds are schemes that intend to take advantage of the opportunities created by special situations in the market. These situations are unique situations, opportunities or challenges faced by a company, sector, or economy as whole.

Feroze Azeez, Deputy CEO, Anand Rathi Wealth Ltd, said special situation funds aim to invest in stocks that are mispriced, often due to companies facing unique circumstances such as regulatory or policy changes, management restructuring such as merger or amalgamation, technological disruptions, or temporary challenges in their operating environments.

While these funds were previously categorized under Category I of Alternative Investment Funds (AIFs), mutual funds are now exploring them to appeal to a broader investor base.

"Most diversified categories have already been explored by mutual fund houses, limiting their ability to introduce new funds within those categories. Thematic investing offers a space for AMCs to explore and experiment with new themes, introducing fresh funds," Azeez said.

Manuj Jain, Co-Head Strategy, WhiteOak Capital AMC, said that the top 10 holdings of special situations funds usually vary significantly from the index and flexi cap funds.

Special Opportunities Funds are particularly suited for long-term investors. The risk-reward profile makes these funds an attractive option for those who understand and are comfortable with the potential volatility, he added.