Investment in infrastructure is considered to be key to future economic growth. While more such investment can help the country in the long run, it makes sense to see if investing in infrastructure funds can help beef up your earnings as well.
What is an infrastructure fund/MF?
An infrastructure fund is a mutual fund that intends to invest predominantly in stocks of companies engaged in the infrastructure sector so as to derive the benefits of growth in infrastructure.
How have these funds performed recently?
In the past three months, infrastructure funds have generated between 10-16 percent returns with an average closer to 13 percent, which is similar to what Nifty has generated, said Saurav Basu, Head, Wealth Management, Tata Capital in an exclusive conversation with CNBC-TV18.com.
These funds on an average have outperformed Nifty 50 index with wider margin in the 6-month, 1-year and 2-year horizons.
Here’s a list of infrastructure funds and how they performed in 2022 so far:
Fund name | AUM | 1 year CAGR | 3 year CAGR | Till date CAGR |
ICICI Prudential Infrastructure Fund (G) | 2018.228 Cr | 25.30% | 25.10% | 13.80% |
SBI Infrastructure Fund (G) | 857.902 Cr | 16.80% | 22.60% | 6.60% |
Invesco India Infrastructure Fund (G) | ||||
459.404 Cr | 14.80% | 27% | 8.20% | |
Quant Infrastructure Fund (G) | ||||
621.406 Cr | 27.50% | 41.40% | 5.50% | |
Tata Infrastructure Fund (G) | ||||
876.367 Cr | 22.70% | 25.90% | 14% | |
IDFC Infrastructure Fund (G) | ||||
625.511 Cr | 6.20% | 22.90% | 8% | |
Sundaram Infrastructure Advantage Fund (G) | ||||
599.603 Cr | 14.60% | 22.30% | 10.30% | |
Bank of India Manufacturing & Infra fund (G) | ||||
77.515 Cr | 12.40% | 28.40% | 9% | |
Kotak Infrastructure & Economic Reform Fund Standard Plan (G) | ||||
578.895 Cr | 22.50% | 24.90% | 9.20% | |
Canara Robeco Infrastructure fund (G) | ||||
221.445 Cr | 21.90% | 26.90% | 13.50% | |
Aditya Birla Sun Life Infrastructure Plan A (G) | ||||
524.156 Cr | 8.40% | 21.70% | 10.10% | |
(Source: Scripbox)
Is it the right time to invest in infrastructure funds? What about the horizon?
In Budget 2022, the government announced that it is planning to incur capital expenditure (capex) of Rs 7.5 lakh crore in 2022-23, which is 24 percent more than in the previous fiscal. While this factor supports the infrastructure theme, you should consider investing in infrastructure MFs for a time frame of 7-8 years to gain reasonable returns as such projects are long-gestation ones and they are largely subject to government controls, Basu told CNBC-TV18.com.
That is the kind of time frame your infrastructure fund will also require to delivery above-market returns.
These funds need to invest at least 80 percent of their net assets in infrastructure stocks. There is, however, no fixed definition of what constitutes ‘infrastructure,’ and this is left to the interpretation of each fund.
Basu, hence, asks individuals to note that infrastructure funds can go through extended periods of underperformance, as they did in 2018 and 2019, and can even deliver negative returns over shorter periods and therefore, are ideally suited only for those with a high-risk appetite.
"This is because they have a concentrated exposure," he said.
Hence, these funds can be an extension to your core equity exposure to diversified equity mutual funds which also have on an average 25 percent exposure to such companies. According to Motilal Oswal, it's better to keep your exposure to infrastructure-themed funds at around 10-15 percent of your total equity corpus.
"It's a thematic funds. So, you need to look at it from your overall financial planning perspective," Motilal Oswal said.
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