Disruption typically has a negative vibe, but it is not always a bad thing. Disruption has changed the world as we know it. For example, technologies such as cloud computing and covid 19 have changed the way people work. Likewise, eCommerce businesses have changed the way people shop.
Further, factors such as regulatory changes, evolving consumer behaviour, sector dynamic shifts, and global events aid disruption. This market disruption increases temporary dislocations in the price of stocks, as financial markets are slow to recognize disruption.
You can invest in such opportunities through a Special Situations fund. Let us look into what a special situations fund is.
What is it?
Special situations such as events (in the short term), dynamic shifts in sectors (in the medium term), and overall disruption and innovation (in the long term) present opportunities for wealth creation when identified at the right time. Special Situation funds are mutual funds that aim to capture such special opportunities.
Fund managers managing special situations funds identify sectors and stocks that are witnessing disruption. Through in-depth research, analysis, and market know-how, fund managers cherry-pick stocks that look promising with a potential for growth in the long term. The fund manager will pick stocks that are either currently underperforming but have the inherent potential for growth.
Special situations funds allow investors to make the most of disruptive growth and even adverse situations. Investors can invest in these funds to further expand their portfolios. This can’t be done in diversified funds.
With the Indian economy primed for disruption and the pandemic only accelerating disruption in businesses, the disruption theme may be an ideal investment opportunity for investors with an investment horizon of 5 years or longer.