Investing in newly-listed companies can give investors early access to businesses with the potential for strong long-term growth. However, capturing these opportunities is not easy for retail investors. Identifying fundamentally-sound companies, securing allotment in often oversubscribed IPOs and staying invested through the inevitable volatility can be challenging.
The Edelweiss Recently Listed IPO Fund (ERLIF) seeks to address these challenges by investing in a curated portfolio of recently-listed companies through disciplined stock selection and long-term portfolio construction. Launched as the close-ended Edelweiss Maiden Opportunities Fund – Series 1 in 2018, the scheme was converted into an open-ended fund and renamed in June 2021. Over the last seven years, it has delivered a compounded annual growth rate (CAGR) of 19 per cent compared with 14 per cent for the Nifty 500 Total Return Index.
Long-term investment
Instead of seeking quick listing gains, the fund focuses on identifying businesses with the potential to emerge as long-term market leaders during their three-five year post-listing growth journey.
The fund’s investment universe is restricted to the 100 most-recently listed companies in India. Regulations require at least 80 per cent of the portfolio to remain invested in this universe, while the balance can be allocated to older IPOs that continue to offer attractive growth prospects. Over the last five years, the portfolio has typically held 42-58 stocks.
It builds positions through anchor allocations, during the IPO process, immediately after listing or even several quarters later if valuations become attractive and business execution remains strong.
Screening framework
Not every IPO qualifies for investment. The fund excludes SME IPOs, pre-IPO investments, companies with a market capitalisation below ₹1,000 crore and IPOs with issue sizes below ₹500 crore. These filters seek to improve portfolio quality while reducing liquidity risk.
Research begins once a company files its draft red herring prospectus (DRHP). The evaluation process includes management interactions, customer and supplier meetings, plant visits, financial analysis and valuation assessment.
The fund follows a selective approach rather than investing in every IPO. It invested in 55 of the 104 IPOs launched in 2025 and in eight of the 21 IPOs launched so far this year. Historically, its participation rate has ranged between 35 per cent and 55 per cent.
Even if the primary market remains inactive for an extended period, the fund’s strategy is unlikely to be affected, as its investment universe comprises the 100 most-recently listed companies rather than only fresh IPOs.
About 60-70 per cent of the portfolio is allocated to secular growth businesses that benefit from long-term structural trends, possess competitive advantages and are expected to sustain earnings growth over extended periods.
The remaining portfolio largely comprises cyclical businesses, where valuations become the key determinant. Since industry cycles can reverse quickly, the fund invests only when valuations provide an adequate margin of safety.
IPO companies often command premium valuations as investors price in their future growth potential. Reflecting this, the fund’s portfolio traded at a P/E of 59 times as of May 2026, well above the flexi-cap fund category average of 38 times (ACEMF data). While valuation remains a key consideration, the fund balances it with business quality and long-term growth prospects rather than pursuing low valuations alone.
Mid-, small-cap bias
The portfolio has a natural bias towards mid- and small-cap companies, reflecting the composition of India’s IPO market. Over the last five years, the fund’s average allocation to large-, mid- and small-cap stocks stood at 12 per cent, 20 per cent and 56 per cent respectively. Most investee companies typically have market capitalisations between ₹5,000 crore and ₹30,000 crore.
Portfolio composition
One distinguishing feature of the fund is its exposure to emerging sectors and business models. IPO cycles often mirror the changing structure of the economy. Depending on the listing pipeline, the portfolio may gain exposure to financial services, insurance, defence, pharmaceuticals, contract manufacturing, digital platforms and other fast-growing industries that remain underrepresented in traditional diversified funds.
Sector exposure is capped at 25 per cent. As of May 2026, pharmaceuticals (11 per cent), retailing (9 per cent) nd capital markets (9 per cent) were the largest sector exposures. However, the sector mix changes significantly as new companies enter the investable universe and existing holdings are exited based on valuations and business prospects.
A bl.portfolio analysis of the fund’s portfolio since inception shows that investments in Polycab India, Dixon Technologies, Affle 3i, Laurus Labs and IRCTC generated multibagger returns. In contrast, investments in Ellenbarrie Industrial Gases, Shankara Building Products, DAM Capital Advisors, Quess Corp, Spandana Sphoorty Financial and FSN E-Commerce Ventures (Nykaa) destroyed investor wealth. This illustrates the fund’s high-risk, high-reward nature.
Exit strategy
Stocks are exited under three broad scenarios: when a better IPO opportunity emerges than the existing stocks; when a company achieves its growth potential earlier than expected and valuations leave limited upside; or when it materially deviates from its IPO strategy or the original investment thesis no longer holds.
Performance
The fund has delivered strong long-term performance. Since inception, its five-year rolling return has averaged 18.5 per cent CAGR compared with 17.5 per cent for the Nifty 500 TRI. Rolling returns ranged between 9 per cent and 26 per cent.
On a three-year rolling basis, the fund generated an average CAGR of 19.3 per cent against 17.8 per cent for the Nifty 500 TRI.
The regular plan carries an expense ratio of 1.9 per cent, while the direct plan’s expense ratio is 0.83 per cent.
Takeaway
Apart from the Edelweiss’ IPO Fund, there are two recently-launched passive funds from Mirae Asset and Motilal Oswal, which track the BSE Select IPO Index. The index retains companies as long as their average market capitalisation remains above that of the 600th stock in the BSE AllCap Index and they have not completed five years in the index. They have a limited track record of around one year.
The Edelweiss Recently Listed IPO Fund offers investors an opportunity to participate in the three-five year post-listing growth phase of newly-listed companies rather than pursuing short-term listing gains. The strategy has the potential to generate outsized returns by identifying future market leaders early in their life cycle.
However, the fund can underperform during market corrections or risk-off phases, as recently-listed companies tend to witness sharper valuation corrections than the broader market. Returns can also suffer when richly-valued IPOs fail to meet growth expectations after listing.
Given its thematic mandate and significant exposure to mid- and small-cap companies, the fund is best suited as a satellite allocation. Investors looking for dedicated exposure to recently-listed companies can consider the fund through the systematic investment route, with an investment horizon of at least five years.
Published on July 4, 2026