Sectoral, thematic funds: Investors should avoid extrapolating past returns

Such behaviour leads to chasing funds that are past peak performance

Sectoral, thematic funds have received strong inflows worth Rs 11,848.4 crore over the past three months. On October 31, these funds had assets under management (AUM) of Rs 2.18 trillion.
 

NFOs, strong returns attracting flows
 

Recently several sectoral/thematic new fund offers (NFOs) belonging to diverse sectors such as innovation, transportation, logistics, consumption, and technology were launched. “Investors get drawn to seemingly exciting opportunities which these funds often represent,” says Kaustubh Belapurkar, director-manager research, Morningstar Investment Advisor.
 

Performance chasing is another driver. “Investors tend to go by high returns. Several sectoral/thematic funds have delivered very strong one-year returns — higher than