Edelweiss Mutual Fund launches Business Cycle Fund, can give better returns in every environment due to special strategy

Business Cycle Fund :Edelweiss Asset Management Limited (EAMC/EMF), one of India’s fastest growing AMCs, has launched Edelweiss Business Cycle Fund. This new fund offer has opened for subscription on July 9, 2024 and will remain open till July 23, 2024. This new open-ended equity scheme follows a business cycle based investment theme designed to effectively capitalise on market opportunities.

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What is the minimum investment

One can invest a lump sum amount of as low as Rs 5000 in Edelweiss Business Cycle Fund. Its benchmark is Nifty 500 TRI. The fund will be managed by Bharat Lahoti Co-Head – Factor Investing and Bhavesh Jain Co-Head – Factor Investing.

The goal is to give better returns

Edelweiss Business Cycles Fund uses a factor investing approach to create three baskets representing quality, growth and value stocks. By diversifying these baskets, the fund minimizes the dominance of any one factor. Within each basket, the fund selects stocks with the highest momentum, resulting in a diversified portfolio of 50-60 stocks. The fund aims to dynamically rotate between sectors over different time periods, combining momentum with fundamentals to enter and exit sectors, thereby generating superior returns.

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How a Business Cycle Fund Works

Business cycle funds can invest in stocks of companies from all sectors and with all market caps. The stocks of good companies from sectors that are expected to perform well as per the business cycle are included in the portfolio of such funds. Generally, based on a specific selection process, sectors are first selected as per the business cycle and then financially strong companies from those sectors are selected. The portfolio of a business cycle fund can include defensive and non-defensive sectors. Defensive sectors are pharmaceutical, FMCG, IT and telecom and these sectors can perform stably even during economic recession. On the other hand, non-defensive sectors include sectors like financial, infrastructure, automobile, cement, which perform better during the economic boom.

Due to this strategy, funds of this category have the ability to perform better in all situations. A business cycle has both boom and recession phases. The performance of some stocks also changes with the change in the business cycle. In such a situation, if the investment portfolio is in line with the business cycle, then better returns can be expected from it.

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Better option for whom

For investors who understand the fluctuations in the stock market and have the ability to bear the associated risks and have an investment horizon of at least 5 years, these funds are a better option. Business cycle funds have both lump sum and SIP investment options.

Dynamic Sector Rotation

Speaking on the launch of the fund, Radhika Gupta, MD & CEO, Edelweiss Mutual Fund said, “Edelweiss Business Cycle Fund offers investors a convenient solution by implementing dynamic sector rotation. This strategy effectively solves the common challenge of timing sector entry and exit that investors often face. Momentum has been the best performing factor in India for many years, and when combined with other fundamental factors, it has proven to be effective in generating returns over the long term. Investing across sectors and market caps, this fund offers a robust solution for core allocation with a long-term focus.