Mutual Funds- Infrastructure Funds

What is infrastructure?

Infrastructure is said to be the tangible aspects such as roads, railways, transportation, and electricity and so on which are indispensible to the day to day functioning of an economy. The state of the infrastructure is instrumental in determining whether the economy is a developed or developing economy.

Subas Tiwari

What are infrastructure funds?

Mutual Funds that invest in infrastructure sector or its ancillary companies that own manufacture and operate infrastructure assets or infrastructure projects are known as Infrastructure funds. The companies invested in these sectors could be directly linked to infrastructure such a construction or production of capital goods or indirectly benefit from sectors like banking and metal. Currently these funds are heavily tilted in their investments towards sectors like, Auto & Auto ancillaries, Banking and Financial Services, fast moving Consumer goods, Telecom, Constructions and Projects and Petroleum and Gas.

Infrastructure Assets include

Toll roads
Airports
Communication assets such as broadcasting, telecom towers
Materials-handling facilities such as Docks
Rail facilities & other transport assets
Utilities such as Electricity, Power Lines & Gas pipelines

Companies/Sectors which are DIRECTLY connected to infrastructure segment

Energy
Real Estate
Power
Metals

Companies/ Sectors which are INDIRECTLY connected to infrastructure segment

Banking
Finance
Transportation

Why anyone has to invest in infrastructure funds in MF portfolio?

Infrastructure funds are likely to perform better during the next 3-5 years (the budget for 2017-18 has provided Rs.2,41,387 cr (with Rs.1,31,000 cr for railways)
The present Government is bullish on providing infrastructure (like roads, rails & shipping to boost Indian economy & also provide huge employment opportunities) to the Indian public
There is expectation that capital expenditure, both from private companies & the Government, are likely to increase in the coming years
The investor market expects falling interest rates which is bound to boost private companies in expanding capacities

What should an investor do in such a situation?

(Make hay when the sun shines)

Do invest in this sector-be it rail, road, airways or shipping

Diversify your portfolio & limit your exposure to a particular sector

Keep your investments in a particular infra sector to 10-15% of the total investment portfolio

By spreading your investments across sectors, one can minimize the risks to a great extent

Invest in Systematic Investment Plan (SIP) or Systematic Transfer Plan (STP) to benefit from any likely volatility in the market

What one should desist from doing?

(Do not put all your eggs in a single basket)

Never take exposure in by investing in lump sum in these funds
Maximize your investments within a time frame between 3-5 years only

(Infra funds have given good returns over a 3 year investment period than for a 5 -7 year period run)

Stock markets crashed in 2008. Infra funds did not get over the –ve impact till 2014. With the new Government in office, the infra sector is picking up and looking up. HAPPY DAYS ARE HERE AGAIN! But don’t throw caution to the winds!
In a growth-oriented economy, infrastructure funds may not get you stable income in the short term but the fund seeks to achieve capital growth in the medium term.

Types of Mutual Funds

Let’s take a look at the MF jargon of wordplay at work. Most of us get confused by their funny names! But the following are the major terminology one needs to know in the ‘variety’ in Mutual Funds.

WHAT ARE	IT MEANS
LARGE CAP MUTUAL FUNDS	Mutual Fund Investments in Companies With market capitalization of over Rs.20,000 Crores. The reference point to categorize them is at SENSEX or BSE-100 INDEX or NIFTY
MIDCAP FUNDS IN MUTUAL FUNDS	Mutual Fund investments in Companies having market capitalization from Rs.5,000 to Rs.20,000 Crores. (The Index is as above)
SMALL CAP FUNDS IN MUTUAL FUNDS	They are also called ‘micro-cap funds’. These refer to investments of less than Rs.5,000 Crores
MULTICAP FUNDS IN MUTUAL FUNDS	They are nothing but Diversified Mutual Funds that can be invested in stocks across market capitalization. Assets can be invested in shares of large, medium & small sized companies
BALANCED FUNDS IN MF	Is a combination of Stock Component (equity) & Bond Component (debt) in a single portfolio indicating investments that are likely to go into EQUITY-DEBT ratio (More equity-based will fetch more returns while the investment risk increases while Debt-oriented will get you modest returns while assuring you of modest risk of your investments)
INDEX FUNDS IN MF	These funds attempt to replicate the performance of a particular index such as BSE, SENSEX OR NSE-50. The portfolio of these schemes will consist of only those stocks that constitute the INDEX. The percentage of each stock to the total holding will be identical to the stocks index weightage
LIQUID FUNDS IN MF	These are open-ended schemes that invest in securities with a maturity of up to 91 days. These could include Treasury Bills (short term borrowing instruments of GOI which enables investors to park their surplus funds while reducing their market risk; they are regularly auctioned by RBI), Money-market instruments (Commercial Paper –CP) and very short-term Corporate Paper (Corporate Bonds).
HYBRID FUNDS IN MF	It is a category of mutual funds that is characterized by portfolio that is made of a mix of stocks & bonds which can vary proportionally over time or remain fixed
ARBITRAGE FUNDS IN MF	These are special types of equity mutual funds which generates returns based on arbitrage opportunities available in stock markets

The Three Handles of this Story

Take a prudent exposure as a part of your investment portfolio
Go for a 3 year investment period
Look for a SIP investment mode

List of Infrastructure Mutual Funds in 2022

Fund name	AUM	1Y CAGR	3Y CAGR	Till Date CAGR
Quant Infrastructure Fund (G)	666.652 Cr	15.80%	38.40%	5.50%
Bank of India Manufacturing & Infra fund (G)	82.63 Cr	7%	24.90%	9%
Invesco India Infrastructure Fund (G)	450.581 Cr	5.10%	23.70%	8.10%
ICICI Prudential Infrastructure Fund (G)	2116.925 Cr	12.30%	22.60%	13.80%
Canara Robeco Infrastructure fund (G)	240.306 Cr	12.40%	22.60%	13.20%
Tata Infrastructure Fund (G)	945.291 Cr	11.90%	21.80%	13.80%
Kotak Infrastructure & Economic Reform Fund Standard Plan (G)	645.575 Cr	11.40%	21.80%	9.10%
HSBC Infrastructure Equity Fund (G)	119.715 Cr	4.50%	20.80%	6.10%
SBI Infrastructure Fund (G)	906.345 Cr	7.80%	19.90%	6.60%
Nippon India Power & Infra Fund (G)	1825.346 Cr	5.80%	19.90%	16.40%
IDFC Infrastructure Fund (G)	656.709 Cr	2.50%	19.40%	7.90%
Aditya Birla Sun Life Infrastructure Plan A (G)	554.363 Cr	-1.10%	19.30%	10.20%
Franklin Build India Fund (G)	1174.258 Cr	4.50%	18.60%	15.70%
LIC MF Infrastructure Fund (G)	90.738 Cr	10.40%	18.40%	6.10%
Sundaram Infrastructure Advantage Fund (G)	636.831 Cr	4.40%	18.30%	10.20%
Taurus Infrastructure Fund (G)	5.413 Cr	3.60%	18.20%	9.30%
L&T Infrastructure Fund (G)	1448.301 Cr	5.90%	17.20%	6.20%
UTI Infrastructure Fund (G)	1499.642 Cr	3.30%	15.80%	12.50%
HDFC Infrastructure Fund (G)	609.125 Cr	9.20%	14.20%	–

Sourced from- https://scripbox.com on 4th Oct 2022