Are thematic MFs good for investors?

MUMBAI: In the mutual fund business, theme-based schemes seem the in-thing. While some fund houses have already tapped the market with such funds, others are on-going, while a few more are in the pipeline. And one of the recurring themes is the current market favourite — infrastructure.
UTI recently launched its Infrastructure Advantage Fund, while HDFC MF and Reliance MF have infrastructure products in the pipeline, according to drafts filed with Sebi.Other sectors being focused on are realty, energy and banking. Sundaram BNP MF launched an energy fund, while ICICI Prudential MF hit the market with a real estate securities fund. Lotus India AMC plans a banking and infrastructure fund while J M Financial just launched an Agri and Infra Fund.
Investors are lapping up these offerings. Tata MF raised about Rs 2,200 crore through Indo-Global Infrastructure Fund, while DBS Cholamandalam and SBI MF infrastructure funds received a good response. So, with these products available to investor, how much money should one allocate to theme-based funds, keeping in mind that not too long ago sectors like IT looked unstoppable. Even automobile stocks, which were doing well a year ago seem lackluster today.
‘‘For a fresh investor it's always wiser to start with a diversified equity fund. However, if you're investing for the long-term, infrastructure and power are more sacrosanct and can be included in a portfolio. Around 15-20% of the portfolio can be allocated to these types of funds,'' said Hemant Rustagi, chief executive officer, Wiseinvest Advisors, a leading MF distributor.
But Rustagi says infrastructure story looks strong over the next couple of years as there is a lot of work to be done. ‘‘To achieve the projected growth of 8-9% for Indian economy, the country's infrastructure must improve and be developed, so these funds are likely to give good returns,'' he said.
But other analysts are not completely sold on the idea. ‘‘A theme-based fund can never be a core part of investor holdings. The outlook for any sector can change at any time. I would recommend a diversified equity fund for any investor for good returns,'' said Mata Securities country head (MF) Sameer Kamdar.