Business Cycle Mutual Funds:Business cycle mutual funds are becoming increasingly popular among people in the field of investment. These funds have given strong returns of 32-56 percent in the last year. During this period, investors have got returns of more than 50 percent from the schemes of HSBC (HSBC), Mahindra Manulife (Mahindra Manulife) and Quant.
What are business cycle funds?
Business cycle mutual funds are a type of mutual fund that invest during different stages of the economic cycle in stocks and sectors that are expected to perform well based on the conditions at that time. According to industry data, all three funds, HSBC, Mahindra Manulife and Quant, have performed much better than the Nifty 500 TRI index, which gave 35.11 percent returns in the same period.
Firoz Aziz, Deputy CEO of Anand Rathi Wealth, said that this impressive growth reflects the increasing interest of investors in these funds.
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There are so many business cycle funds in the market
Currently, there are only 16 business cycle funds in the market, out of which only three have completed their three-year tenure. There has been a rapid increase in assets under management (AUM) of this category of funds, which has increased from Rs 17,238 crore to Rs 37,487 crore in September 2021. This growth reflects increasing investor interest in these funds.
How do these funds select shares for better returns?
Business cycle mutual funds try to identify the economic cycle and select stocks from sectors that may perform well in different market conditions. These funds move their investments across different sectors depending on the different conditions of the economy like recession, early recovery, mid-cycle growth and late-cycle slowdown. Are.
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For example, in recessions, defensive sectors like utilities and pharmaceuticals perform well. In contrast, sectors like automobile, finance and basic infrastructure see benefits in the initial recovery phase.
Of the 16 such funds currently available, 10 mutual funds have a track record of more than one year and all but one have outperformed the Nifty 500 TRI in the last 12 months. According to industry data, these 10 funds have given an average return of 42 percent.
In the last one year (till October 17), HSBC Business Cycle Fund gave an impressive return of 56.3 per cent, followed by Mahindra Manulife Business Cycle Fund with 56.17 per cent and Quant Business Cycle Fund with 50.8 per cent. All three funds have outperformed the benchmark by 15-21 percentage points, delivering strong returns despite economic volatility. Details of other performing funds are as follows.
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These are also included in the top 10 funds giving best performance
Business Cycle Fund Name – Return Percentage
Baroda BNP Paribas Business Cycle Fund – 44.58%
ICICI Prudential Business Cycle Fund – 42.27%
Tata Business Cycle Fund – 41.26%
Kotak Business Cycle Fund – 40.03%
Axis Business Cycle Fund – 39.02%
Aditya Birla Sun Life Business Cycle Fund – 36.33%
HDFC Business Cycle Fund – 31.97%
Interestingly, these top performing funds have maintained their momentum in the last six months, with HSBC Business Cycle Fund returning 26.72 per cent, Mahindra Manulife Business Cycle Fund returning 20.88 per cent and Quant Business Cycle Fund returning 17.7 per cent. . Apart from these, the top three funds have outperformed the Nifty 500 TRI index, which has given a return of 15.2 per cent in the same period. The remaining seven funds gave returns ranging from 13 percent to 23 percent during this period.
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Siddharth Alok, AVK Investments, Multi Ark Wealth at Epsilon Group, said business cycle funds are becoming a topic of discussion, mainly due to their high returns. This success is primarily driven by strong performance in select sectors and themes. The growing interest in India’s infrastructure and manufacturing has led to rapid re-rating of many companies. Funds with high exposure to such sectors have earned good returns. Since business cycle funds focus on such themes, they have achieved solid returns.
The Indian economy has made sectors like defence, energy, ITES, BFSI and health care more attractive. Business cycle funds that can actively invest in these sectors when cycles change are a good option for investors looking for higher returns. These funds also save investors the hassle of switching between different regional funds or timing the entry and exit points.
However, these funds have not been running for more than five years – which is the minimum period for evaluating thematic funds – so relying only on recent performance may not be the best strategy at this time. Typically, business cycle funds take a top-down approach to identifying phases of economic or sector cycles while adopting a bottom-up approach to stock selection.
These funds have the flexibility to invest across different market caps and do not have any restrictive mandate, which helps them benefit from broad benchmark rallies. Additionally, these schemes can make concentrated bets on sectors where money managers have high confidence, thereby increasing profits during favorable sectoral trends. Since regional rotations are managed dynamically, the chances of a high-risk-high-reward scenario are better.
