Infrastructure-based funds back in vogue due to govts big push by sdfsb346f


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									Infrastructure-based funds back in vogue due to
govt's big push
The Economic Times: August 03, 2009

Mumbai: The infrastructure theme in mutual funds industry is like festivals in
India. It 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

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

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.

Apart from the theme play, investors should also consider the point that most
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.

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