Bandhan Asset Management Company Launches Business Cycle Fund
Bandhan Asset Management Company (AMC) has recently unveiled its new investment product, the Business Cycle Fund. The fund’s New Fund Offer (NFO) commenced on September 10 and is set to conclude on September 24. The growth of business cycle funds has been remarkable, with the number of offerings in the market increasing from just one at the beginning of 2020 to 13 currently. This trend reflects a growing desire among investors to capitalize on economic growth opportunities.
Understanding Business Cycle Funds
The objective of the Business Cycle Fund is to strategically adjust its sector allocations according to various phases of the economic cycle. This flexible approach allows the fund to seize growth opportunities while effectively managing risk. For instance, sectors like financials and real estate are likely to thrive during economic expansion, whereas consumer staples and utilities may perform better during downturns.
Strategic Cash Allocation
Vishal Biraiya, the Vice President of Equities at Bandhan AMC, highlighted that the fund will maintain a cash allocation of up to 15% to navigate volatility. Additionally, he noted that there would be a significant deviation of at least 25% for the top three to five sectors at any given time, allowing for a dynamic and responsive investment strategy. The fund will be managed by Biraiya and his colleague, Ritika Behera.
Strong Historical Performance
Over the past four years, business cycle funds have established a solid reputation in the thematic investment category. The assets under management (AUM) for these funds skyrocketed from Rs 670 crore in early 2020 to an impressive Rs 32,322 crore by July 2024. When evaluated against the Nifty 500 Total Return Index, these funds have demonstrated commendable returns, particularly in the past three years. The investment strategy for this fund focuses on both top-down and bottom-up approaches to identify promising companies.
Assessing Potential Risks
It’s crucial for potential investors to be aware that business cycle funds, while promising, come with inherent risks. This category is relatively new, with only one fund boasting a track record of five years, and three others around three years old. Many newly launched funds in this sector may be influenced by the ever-changing dynamics of the global economy, which can significantly affect the performance of the business cycle.
Is This Fund Right for You?
Experts in the investment field suggest that the combination of continued capital injection from both private and government sectors can bolster the growth potential for investors in business cycle funds over the long term. Ravi Kumar TV, founder of Gaining Ground Investment Services, emphasized the importance of accurately predicting the phases of the business cycle for the fund’s success.
However, it is advisable for investors to carefully consider the high-risk nature of sectoral and thematic fund strategies. Given that business cycle funds are still in their infancy, individuals seeking less volatile options may want to explore diversified solutions such as flexi-cap funds.
Conclusion
In summary, while the Business Cycle Fund offers an exciting investment avenue for those willing to navigate its associated risks, thorough research and a diversified investment approach may serve investors better in the current market landscape. As always, consulting with a financial advisor is recommended before making investment decisions.
