Sectoral, thematic funds underperform markets

THE SECTORAL AND thematic funds category of equity mutual fund schemes which has seen an increase of nearly 130% in its assets under management (AUM) from 2023 and contributes to nearly 15% of the total equity AUM,has underperformed the market returns both over one-and three-year periods.

- ANANYA GROVER

An analysis of data from Value Research shows that thematic funds across categories have given returns of(-)1.7% on an average in the past one year and (-)16.33% in the past three years as of December 11. During the past one year, the large-cap benchmarks, Nifty and Sensex, have risen 4-5% and the 500-stock indices of both the exchanges gained between 0.6% and 0.8%.

Over a three-year period, while large-cap benchmarks have risen nearly 40%, broader 500-stock indices have gained between 46% and 49%. In the sectoral schemes, the average one-year return has been 4.5%, and 17% in the past three years.

Prateek Nigudkar, senior fund manager, Shriram AMC, said:“Sector-specific funds often see investors entering at the wrong point in the cycle - typically near the peak - which makes them sub-optimal investment vehicles for most people."