In October 2017, SEBI came out with guidelines for scheme categorisation. The aim was to reduce duplication and bring uniformity across fund offerings. However, this has also created space for fund houses to expand their offerings in the space where they are not present.
Since then, fund houses have introduced many schemes. Interestingly, sectoral or thematic funds, particularly healthcare funds, manufacturing funds and consumption funds are favoured. Let’s take a look at these fund categories.
Healthcare funds
Among thematic funds, this category has been one of the most popular ones.
Since June 2018, four schemes - IDBI Healthcare Fund, DSP Healthcare Fund, ICICI Prudential Pharma Healthcare and Diagnostics Fund and Mirae Asset Healthcare Fund were launched.
These funds are open-ended equity schemes that invest at least 80% of their total assets in companies engaged in healthcare and allied sectors.
The allied sectors include pharmaceutical, healthcare, hospitals and diagnostics, insurance, wellness, nutrition, health IT services and medical equipment, among others.
Consumption funds
In this category, ICICI Prudential Bharat consumption fund and BNP Paribas India consumption fund are the two new funds since June 2018.
These funds are open-ended equity schemes that invest at least 80% of their total assets in companies engaged in consumption-related activities or allied sectors.
The allied sectors include consumer non-durables, healthcare, auto, telecom services, pharmaceuticals, hotels, media and entertainment.
Focussed funds
A couple of AMCs have floated focussed funds. L&T MF introduced L&T Focused Equity Fund in November that invests in maximum 30 companies across large, small and midcap.
Mirae MF launched Mirae Asset Focussed 25 fund earlier this month. As the name suggests, it will invest in stocks of a maximum 25 companies.
Union MF has also filed offer document with SEBI to launch Union Focussed Multicap Fund, an open-ended equity scheme.
Others
Other notable funds include Mahindra MF’s Mahindra Rural Bharat and Consumption Yojana. This is an open-ended equity scheme, which invests 80% of its assets in entities having exposure to rural India. The benchmark for this this scheme is Nifty 200 Index.
ICICI Prudential MF launched ICICI Prudential Manufacture in India Fund. It is an open-ended equity scheme, which invests 80% of its assets in companies engaged in manufacturing theme.
Among other sectors, Sundaram MF came up with a service sector fund. It launched Sundaram Services Fund, an open-ended equity scheme that invests at least 80% of its total assets in companies related to service sector.
Among other notable schemes, Axis MF has sought SEBI’s approval to launch Axis All Season Bond Fund. This will be an open-ended fund of funds, which aims to invest predominantly in units of debt oriented MF schemes. Benchmark for this fund is NIFTY Composite Debt Index.
Experts’ take
Vinod Jain of Jain Investments, Mumbai said that he would only advise investors to opt for these funds, if they are young, willing to stay put for 5-10 years and have a good risk appetite. Allocation to these funds should be 5-10% of such investors, he added.
However, Mumbai RIA Suresh Sadagopan, founder of Ladder7 Financial Advisories has a different opinion. He said that he would never recommend NFOs. “For me, it is difficult to take a call on some sectors. My investment philosophy is to bet on growth story of the entire economy, rather than picking a few sectors. If a sector does well then good fund managers would anyway include that in their funds,” he said.
