Use market rebound to prune exposure to thematic funds
Investors have allocated large sums of money to thematic and international funds over the 12 months to October 31. Data from the Franklin Templeton industry dashboard showed that sectoral and thematic funds accounted for ₹1.4 lakh crore or 40% of the total flows of ₹3.5 lakh crore to the mutual fund industry during this period.
Sectoral and thematic funds command the largest assets under management of ₹4.52 lakh crore in the equity mutual fund category, followed by the flexi-cap category (₹4.27 lakh crore). Sectoral and thematic indices often tend to fall higher than the broad-based indices. Compared to the Nifty 50, which fell 7.8% from its 52-week high, the Nifty India Defence index fell 24.7%, Nifty Energy fell 17.8%, Nifty Auto fell 14.6% and Nifty PSE fell 14.7%.
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Distributors point out that investors often pour money into sectoral and thematic funds going by past returns. Investors allocated large sums of money to themes such as energy opportunities, manufacturing, defence, innovation and automobile or transportation, with new fund offerings coming from many fund houses.
«We are seeing investors who have randomly bought thematic funds, with such schemes accounting for 50-60% of the total portfolio,» said S Shankar, certified financial planner, Credo Capital.He said investors with high allocations to such funds could prune their allocations to thematic funds to 10% of their portfolio. Fund managers said
