To draw traders in search of the following large wager, mutual fund (MF) homes have been lining up new technology thematic schemes that present alternatives in areas corresponding to blockchain, electrical transportation, mobility, and synthetic intelligence, amongst others.
For example, Navi MF has utilized for a fund based mostly on the web of issues, metaverse, and electrical automobiles. IDFC MF is seeking to launch a mobility-based scheme, whereas Aditya Birla Solar Life MF plans to launch a blockchain and digital property fund. Nippon India MF has filed for one based mostly on synthetic intelligence.
These funds, if authorized by market regulator, the Securities and Alternate Board of India (Sebi), would have most of its investments in abroad corporations.
Nonetheless, as of now, abroad MFs have been barred from accepting recent cash because the trade restrict of $7 billion has been reached. Market observers anticipate the restrict to be raised quickly. Nonetheless, it’s unclear whether or not Sebi will permit the launch of blockchain or crypto-focused funds within the absence of regulatory readability in India in these areas.
Individually, corporations have additionally launched new-age India-focused funds. These embrace the ICICI Prudential Housing Alternatives Fund, which invests in corporations anticipated to learn from the expansion in housing theme. HDFC MF has filed for India’s first defence fund.
Whereas most of those alternatives weren’t obtainable to traders earlier than, the query is, ought to traders have these schemes of their portfolios?
Monetary advisors are unequivocal of their views that small traders ought to keep away from new-age thematic funds.
“For 9 out of 10, who are usually not savvy traders, none of those are actually required. All you want is diversification throughout markets and a few geographic diversification,” mentioned Kirtan Shah, founder and CEO, Credence Wealth Advisors.
Tarun Birani, founder, of TBNG Capital and a Sebi-registered funding adviser, means that thematic performs ought to be taken within the greater threat bucket than a standard diversified fund.
“Thematic funds ought to be taken extra like a tactical wager in your portfolio. And these funds are advisable for any person who’s already available in the market for a protracted time period, understands the ups and downs and has seen some cycles available in the market,” Birani mentioned.
Specialists say that the important thing threat of investing in a thematic fund is the dearth of diversification. One other main threat to those funds is that they’re extremely inclined to market actions. For instance, international tech shares slumped 40-50% over the previous few months consistent with weak spot in broader markets.
Traders also needs to be aware that thematic funds even have authorities, geopolitical and geographical dangers.
“Traders might need to dedicate extra time to thematic funds in contrast with even small-cap funds. Additional, let’s say you make investments 5% of your portfolio in a particular theme, and the theme outperforms your different funds by even 10%, your general portfolio is barely going to get impacted by 0.5% however there is no such thing as a finish to the danger,” mentioned Shah.
Nonetheless, these themes may match for savvy traders.
In response to Shah, savvy traders can have thematic investments however their share must be a barely bigger a part of the portfolio for them to make any significant influence.
Birani feels that tech stays a sturdy theme over a protracted interval. “New-age web corporations, the way in which the enterprise disruption is occurring throughout the sector. That’s one space the place positively I really feel it’s a long-term structural theme. Additionally, there’s lots of advantage to take a look at the EV theme. Nonetheless, as we don’t have a lot credible corporations in India, we’ve got to take a look at international corporations,” he added.
Mint View
A median investor doesn’t have the tendency to trace investments consistently. Due to this fact, it’s higher for small traders to stay to a pure play diversified schemes, the place an skilled fund supervisor has the facility to establish themes based mostly on advantage. Nonetheless, savvy traders who’ve the flexibility to take tactical calls on their portfolios can take a look at having 5-10% of their publicity to those new-age themes.
Supply: Live Mint