Invest in thematic NFOs after building a core portfolio first

economictimes.indiatimes.com:

NFOs), many of which are sectoral and thematic in nature, and are now open for subscription as they look to capitalise on investor interest and garner more assets. Wealth managers, however, say that thematic offerings need constant monitoring and should be timed well, and investors should first build a core portfolio and subsequently allocate to themes, restricting allocation to 20% in equity portfolios.

Among the thematic NFOs available in February are SBI Energy Opportunities fund, Quant PSU Fund, Kotak/Edelweiss Technology Fund, BNP Paribas Innovation Fund, Union Business Cycle Fund and Canara Robeco Manufacturing Fund. Distributors point out that as per regulatory guidelines, a fund house can have only one scheme in each category, prompting them to look for thematic funds where there are no such restrictions. Large fund houses are now eyeing thematic launches, having exhausted their diversified equity mutual fund category.

«We believe investors can opt for thematic funds that have a differentiated strategy and have something unique to offer. Given government's thrust on solar/renewable energy and improving efficiency in the public sector, we believe such themes can work well,» says Viral Bhatt, founder, Money Mantra. Bhatt recommends SBI Energy Opportunities Fund and Quant PSU Fund.

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Distributors say investors are attracted to NFOs due to high decibel marketing by fund houses across mediums, attractive