Infrastructure funds invest mainly in stocks of companies in the power, construction, capital goods and metals segments
In the massive market rally from March 2020, infrastructure stocks have been major beneficiaries and participants. Naturally, mutual funds that invest exclusively in such stocks have delivered spectacular returns. The top five schemes have doubled investors’ money over the last one year, according data from Valueresearch. Infrastructure funds invest mainly in stocks of companies in the power, construction, capital goods and metals segments. These funds are risky and require timing of entry and exit. Also, even their direct plans charge high expense ratios. Being a broad theme, many stocks in the segments mentioned above are of the midcap variety. All expense ratios and returns mentioned are for direct plans of these schemes.
Quant Infrastructure fund has delivered over 118 percent returns in the last one year. It is the chart topper in the category. The scheme has a corpus size of only Rs 85 crore and charges an expense ratio of 2.15 percent for its direct plan. Its top holdings mainly comprise well-known large-cap names, though it invests in midcaps as well.
ICICI Prudential Infrastructure fund is the next in the list with 108.6 percent returns in the last one year. It is the largest scheme in the category, with assets of Rs 1,680 crore. Its direct plan charges 1.74 percent as expense ratio. Power, energy, construction and financial stocks figure prominently in the fund’s portfolio. Around 61 percent of the fund’s assets are invested in large-cap stocks, while the balance is deployed in mid and small-caps.
Investors in the IDFC Infrastructure fund would be richer by 104.8 over the last one year. The fund has large investments in construction, cement, power and energy companies. It manages assets worth Rs 650 crore. The expense ratio is relatively lower at 1.25 percent. The portfolio is dominated by mid and small-cap stocks with nearly two-thirds of the holdings directed to such picks.
HSBC Infrastructure Equity fund delivered nearly 102 percent returns over the past one year. It is a relatively smaller fund with assets of Rs 112 crore. The expense ratio is 1.18 percent.
Aditya Birla Sun Life Infrastructure fund delivered fell a tad short of doubling investors’ money with returns of 97.4 percent over the past one year. It manages assets of Rs 570 crore. The expense ratio is 1.82 percent. Construction, engineering, energy and metal stocks figure prominently in the portfolio. The fund’s holdings are majorly tilted towards mid and small-caps.
These funds are not our recommendations. Like all thematic funds, infrastructure schemes too are volatile and cyclical in nature. There could be periods of sharp rallies coinciding with economic recovery and helpful government policies. But there may also be long periods of underperformance. Timing of entry and exit becomes crucial to make the most of the category, though that is easier said than done. Only after your portfolio is well-diversified and you exhaust all regular categories must you consider sector/thematic funds. You must deploy only small sums, if at all, in such schemes. Take the help of an advisor or follow our MC30 list to choose quality diversified debt and equity schemes.
