The infrastructure sector has caught the fancy of a number of asset management companies. Last week, Bharti AXA Investment Managers launched Focussed Infrastructure Fund. Already, there are 18 infrastructure schemes.
Prateek Agrawal, head, equity, Bharti AXA Investment Managers, said, “Our research has shown that core infrastructure stocks in the BSE-100 index have outperformed the index by 19 per cent compound annual growth rate over three years.”
Typically, the mandate of infrastructure schemes is very wide. But, Bharti AXA’s fund will look at only infrastructure-oriented companies. The scheme, as a result, is proposing to not invest in sectors like banking, automobiles, paper and pharmaceuticals.
If one goes by historical numbers, infrastructure schemes have performed well. Data from Value Research, a mutual fund rating agency, show that while the Sensex has given returns of 91.29 per cent in the last one year (as on 22 January), five of the 18 infrastructure schemes have given better returns. Taurus Infrastructure has given whopping returns of 159.81 per cent.
Investment experts say the wide mandate is perhaps a bigger reason for such high returns rather than the theme per se.
As a retail investor, one should look at thematic funds cynically. Investment experts say a person should invest a small part of his portfolio in such schemes. Sumeet Vaid, founder, Freedom Financial Planners, said, “I am not comfortable with taking a call on themes or sectors because it’s difficult to predict where they are headed.”
Thematic funds carry all the risks associated with concentrating on a single sector. The basic idea of investing through mutual funds is that they help a person take exposure to different sectors, leading to lower risks.
More From This Section
By investing in a theme fund, one is putting all eggs in one basket. Investing in top stocks of the same sector could be a better idea, said investment experts.
This is especially true of a sector like infrastructure where government policies play a big role. Abhinav Angirish, managing director, Abchlor Investment Advisors, said, “High-return themes like power and infrastructure are very sensitive to government policy changes.”
Another argument against excess exposure to these schemes is that the fund manager is quite likely to run out of options over a period of time. Kartik Varma, co-founder, iTrust Financial Advisors, said, “Only those who have a sound investment portfolio can think of experimenting with thematic funds.”
Thematic funds are capable of superlative performances, but can be erratic. “For those who want to experiment with themes, power and infrastructure are good options under the high-risk category,” said Angirish.
According to investment experts, do not invest more than 10-15 per cent of your overall portfolio in thematic funds.