The Hindu Business Line : Tata Infrastructure Fund: Hold

Investors can retain their investments in Tata Infrastructure Fund, a theme fund. It has generated a return of 11 per cent for the past year. The performance compares favourably to that of several diversified equity funds during the same period.

However, it appears to have trailed other theme funds such as UTI Infrastructure, DSPML T.I.G.E.R and PruICICI Infrastructure by 5-8 percentage points over the period.

Thematic funds carry a higher risk profile than diversified funds as they take concentrated bets in specific sectors and stocks. Tata Infrastructure, however, has a higher exposure to large-cap stocks, with close to 60 per cent of the assets invested in stocks with a market capitalisation above Rs 5,000 crore. This may help reduce volatility in returns compared to portfolios with a higher mid-cap exposure.

The infrastructure sector plays an important role in GDP growth and private as well as public spending on infrastructure is set to grow at a rapid pace. This may create attractive investment options for the fund in the infrastructure space. However, given the nature of infrastructure stocks, this fund is suitable for investors ready to wait a considerable time to reap the benefits. Those investing in thematic funds should first understand the theme and the risk profile of such funds. Any change in Government regulations could affect returns in the short term.

Performance: Tata Infrastructure Fund has returned 41 per cent since inception on a compounded annualised basis and outpaced the benchmark Sensex by 3 percentage points the last year.

Over the same period, DSPML T.I.G.E.R., which has a similar investment style and theme, has rewarded its investors with close to 49 per cent returns. Close to 50 per cent of the stocks in the Tata Infrastructure portfolio are similar to those in the T.I.G.E.R. fund. Over the past 24 months, the fund has trailed the benchmark on 11 occasions, on a monthly return basis.

Portfolio Overview: Tata Infrastructure Fund has a well-diversified portfolio of 71 stocks. The top ten stocks cornered 36 per cent of the assets. Three preferred sectors — capital goods, construction and telecom services — together accounted for 43 per cent of portfolio.

The fund appears to follow a buy-and-hold strategy in a majority of the stocks. Construction and cement account for 16 per cent of the assets, which could explain the slowdown in performance after the correction witnessed in this space.

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