recurs with predictable regularity to garner mixed
response. This year funds that play
on infrastructure theme are back in vogue, because of the Budget’s emphasis on infrastructure. The government has earmarked Rs 12,887 crore for urban infrastructure, an increase of 87% over the previous year.
This gives an indication for infrastructure funds and investors to align their strategies towards the theme. If reports are to be believed, Reliance MF new infrastructure fund offer has managed to mop up around Rs 2,500 crore. So would these do well to offer good returns ? Would it be prudent to invest in these funds? We at ETIG analyse the performance of existing schemes in bullish and bearish phases in the light recent development in the power sector.
STRUCTURE AND PERFORMANCE
A confusion investors face while investing in infrastructure funds is how different those are from diversified equity funds. They are among the most diversified funds. The confusion has, however, been compounded by the marketing strategy employed by fund houses.
Last two years’ performance record suggests that around 10 diversified equity funds beat most of the infrastructure funds on returnsparameter . However, in the last oneyear Taurus Infrastructure Fund has been the best performer in the entire gamut of such funds. This is a critical period to gauge a fund’s performance considering market volatility. The fund has given a reasonable 21% returns in the last one year and for last six months it has given a whopping 119%.
Sahara Infrastructure Variable Pricing is the second best performing fund, which has given around 20.9% returns in the last one-year and 78.23% in the last six months.
Reliance Diversified Power and ICICI Pru Infrastructure are two formidable players in the industry. Sectors such as Oil & Gas, Petroleum & Refinery, Power Generation, Transmission & Equipment, Engineering & Industrial Machinery, and Electricals & Electrical Equipments are the main composition of both Taurus Infrastructure Fund and Sahara Infrastructure Variable Pricing. Investors who invested in infrastructure theme funds and held on from January 2006 to December 2007, would have made returns of anywhere between 50% and 100% in this period.
THE DISTINCTION
As an investor you should lay immense stress on the track record of an infrastructure fund before investing with it. Though the objective of diversification to varied sectors remains the same for both diversified and infrastructure funds, it makes sense that as an investor you should regularly book profits on the theme you see in vogue irrespective of the long term. The reason being infrastructure funds, on an average, have declined more than 40 % yearto-date , higher than the declines seen in most diversified funds.
infrastructure funds have track record of less than five
years. Hence, it would be too
early to form a confirmed opinion on the performance of infrastructure funds considering the projects and plans of an infrastructure are long-timed . Those investors who hope to gain for the short-term diversified equity funds, however, those believe in longer we-stay-and-higher-wegain norm are set to benefit from prudent investing in infrastructure funds.
Also given the recession phase, the government’s stimulus is obvious. And considering the government’s intervention, it would inadvertently focus on infrastructure projects and hence funds investing in infrastructure companies are set to gain. Investors intending to play Indian equity, infrastructure funds are must.
Source: http://economictimes.indiatimes.com/Features/Investors-Guide/Infrastructure-based-funds-back-in-vogue-due-to-govts-big-push/articleshow/4850287.cms?curpg=2
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