Top 3 PSU mutual funds with consistent returns: SBI, Invesco, Aditya Birla deliver up to 34% CAGR in 3–5 years – Money News

A look at recent data from AMFI and Value Research shows that three PSU-focused funds — SBI PSU Direct Fund, Invesco India PSU Equity Fund, and ABSL PSU Equity Fund — have emerged as the most consistent performers across both 3-year and 5-year periods, delivering returns of up to 34% CAGR.

This strong showing by the three funds is not an isolated case but reflects a broader trend in the category. The Equity: Thematic–PSU segment itself has been topping return charts across the mutual fund universe, delivering around 31.43% CAGR over 3 years and 29.30% over 5 years.

The consistent outperformance of SBI PSU Direct Fund, Invesco India PSU Equity Fund, and ABSL PSU Equity Fund is therefore part of a larger PSU rally, driven by improving balance sheets of government companies, strong earnings growth and sustained policy support. In effect, these funds have not only benefited from stock selection but also from being positioned in the best-performing equity category over both 3-year and 5-year periods.

Strong performance across both 3-year and 5-year periods

Data source: AMFI, Fact Sheets, Value Research

What makes these funds stand out is not just high returns, but their ability to stay among top performers in both time frames, highlighting consistency rather than one-off gains.

SIP investors also benefited significantly

The consistency is also visible in SIP returns, where all three funds ranked among the top performers over a 5-year period.

SBI PSU Direct Fund delivered 26.99% SIP return, turning a Rs 10,000 monthly investment into Rs 11.67 lakh

ABSL PSU Equity Fund gave 25.07%, growing to Rs 11.14 lakh

Invesco India PSU Equity Fund returned 25.20%, with corpus reaching Rs 11.18 lakh

This shows that systematic investors also captured the PSU rally effectively, not just lump-sum investors.

What is driving this consistency?

The answer lies in sector positioning and portfolio strategy.

All three funds are heavily tilted towards core PSU sectors such as energy, utilities, and financials, which have seen strong earnings growth and valuation re-rating.

SBI PSU Fund has a sharp tilt towards Energy & Utilities (44%) and Financials (31%), with large exposure to stocks like SBI, NTPC and Power Grid

Invesco’s fund is more balanced across Energy, Financials and Industrials, reducing concentration risk

ABSL PSU Fund has a high allocation to Financials (39%) along with Energy (36%), making it relatively more banking-heavy

This sectoral exposure has played a key role in sustaining returns across cycles.

Risk-adjusted performance shows a mixed picture

While returns have been strong, risk metrics reveal some differences:

SBI PSU Fund stands out with positive alpha and better Sharpe ratio, indicating strong risk-adjusted performance

Invesco and ABSL funds, despite high returns, show negative alpha, suggesting underperformance relative to benchmark after adjusting for risk

All three funds fall under the “Very High Risk” category, typical of sectoral/thematic funds.

Fund basics at a glance

SBI PSU Fund (launched in 2013) manages Rs 5,891 crore with expense ratio of 0.85%

Invesco PSU Fund (2013) has a smaller AUM of Rs 1,335 crore and expense ratio of 0.91%

ABSL PSU Fund (2019) is relatively newer but has scaled up to Rs 5,334 crore with lower expense ratio of 0.62%

What should investors keep in mind?

While the numbers look attractive, investors should exercise caution.

Sectoral funds like PSU funds are highly cyclical and concentrated bets. Their performance is closely tied to specific sectors, which means returns can be volatile and may not sustain in different market phases.

Most importantly, past performance should not be the sole criterion for investing in mutual funds. Investors should also consider factors such as risk appetite, diversification, investment horizon, and overall portfolio allocation before making a decision.

Summing up…

The recent PSU rally has created a rare set of funds that have delivered both high returns and consistency across 3 and 5 years. However, whether this performance sustains will depend on how long the underlying sector momentum continues.

For now, these three funds clearly show that consistency, not just peak returns, is what sets long-term winners apart.

Disclaimer:
The returns and data mentioned above are based on historical performance and publicly available information. Mutual fund investments are subject to market risks, and past performance may not be sustained in the future. Sectoral and thematic funds, such as PSU funds, can be highly volatile and may not suit all investors. Readers are advised to assess their risk appetite, investment goals, and consult a financial advisor before making any investment decisions.