What are Contra Mutual Funds, who should invest:Investors investing in the market usually prefer to invest in stocks that are performing well. But the investment strategy of Contra Funds, which come under the category of equity mutual funds, is completely different from this. The fund managers of contra funds look for stocks whose performance is not good but bad! Actually, the investment philosophy of contra funds is to identify and invest in such stocks which are showing weakness right now, but in the long term, the downward trend is likely to turn into an uptrend. They are called contra funds because they move in the opposite direction of the thinking of common investors. The number of such funds in the Indian market is very few, but in the last 1 year their return has been 45 to 55 percent. Contra funds have also given good returns during the last 3, 5 or 10 years.
Past Performance of Contra Funds
Only three contra funds have past performance data available on the Association of Mutual Funds in India (AMFI) portal: 1. SBI Contra Fund, 2. Invesco India Contra Fund and 3. Kotak India EQ Contra Fund. These three funds have given good returns to their investors in the last 1, 3, 5 and 10 years.
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1. Kotak India EQ Contra Fund
1 Year Average Return (Direct): 55.27%
1 Year Average Return (Regular): 53.21%
3 Year Average Return (Direct): 25.19%
3 Year Average Return (Regular): 23.50%
5 Year Average Return (Direct): 27.40%
5 Year Average Return (Regular): 25.68%
10 Year Average Return (Direct): 18.46%
10 Year Average Return (Regular): 16.79%
Asset Under Management (AUM): Rs 3,941.99 crore (3 September 2024)
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2. Invesco India Contra Fund
1 Year Average Return (Direct): 52.14%
1 Year Average Return (Regular): 50.40%
3 Year Average Return (Direct): 23.31%
3 Year Average Return (Regular): 21.85%
5 Year Average Return (Direct): 26.95%
5 Year Average Return (Regular): 25.44%
10 Year Average Return (Direct): 19.18%
10 Year Average Return (Regular): 17.59%
Asset Under Management (AUM): Rs 17,757.31 crore (3 September 2024)
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3.SBI Contra Fund
1 Year Average Return (Direct): 45.92%
1 Year Average Return (Regular): 44.53%
3 Year Average Return (Direct): 29.71%
3 Year Average Return (Regular): 28.59%
5 Year Average Return (Direct): 34.19%
5 Year Average Return (Regular): 33.16%
10 Year Average Return (Direct): 18.39%
10 Year Average Return (Regular): 17.56%
Asset Under Management (AUM): Rs 39,511.91 crore (3 September 2024)
(Data Source : AMFI)
SBI Contra Fund’s return is highest in 3, 5 years
It is clear from the above data that all three contra funds have given good returns in the last 1, 3, 5 and 10 years. In the last 1 year, the highest return of 55.27% has been of the direct plan of Kotak India EQ Contra Fund, while in 3 years the highest return of 29.71% has been of the direct plan of SBI Contra Fund. In 5 years also, the highest return of 34.19% has been of SBI Contra Fund, while in 10 years the highest return of 19.18% has been of Invesco India Contra Fund. Obviously, all three schemes have been successful in giving good returns to the investors.
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For which investors are contra funds right
Contra funds fall under the category of equity funds. As per SEBI rules, at least 65% of the investment in any equity fund must be in equity shares. In reality, this investment can be much more than this. According to the latest data, currently 99.15% of the investment in the portfolio of Invesco India Contra Fund is in equity. At the same time, the share of equity in the portfolio of SBI Contra Fund is 89.64% and in Kotak India EQ Contra Fund it is 98.35%. Due to such high exposure in equity, the market risk in contra funds is very high. This is the reason why they have been placed in the Very High Risk category on the riskometer. Obviously, before investing in them, any investor should think well about his risk-taking capacity. Apart from this, the managers of contra funds invest in such undervalued stocks, whose current performance is not good, but is expected to improve in the future. They make such investments keeping in mind the long term prospects. Therefore, investors with a short-term horizon should stay away from them. Contra funds are suitable only for those investors who are willing to take market-related risks and can wait for a long period for better returns.
