What’s the story
Business cycle mutual funds have emerged as a strong player in the investment sector, delivering impressive returns of between 32% and 56% over the past year.
Leading the trend are schemes from Mahindra Manulife, HSBC, and Quant, each generating returns of over 50%.
These top-performing mutual funds have outperformed the Nifty 500 TRI index, which yielded a return of just over 35% during the same period.
AUM of business cycle funds more than doubles
The assets under management (AUM) for business cycle funds have skyrocketed to ₹37,487 crore from ₹17,238 crore in September 2021.
This spike shows that investors are increasingly interested in these funds.
Feroze Azeez, Deputy CEO of Anand Rathi Wealth, confirmed this. He said these funds seek to identify economic cycles, and pick stocks from sectors that would do well under certain market conditions.
Investment strategy and performance
Business cycle funds follow a strategy of rotating investments across sectors according to different phases of the economy.
This strategy has worked well for investors, particularly in volatile economic conditions.
Of the 16 business cycle funds available in the market, 10 of them have a track record of over a year.
All but one have outperformed the Nifty 500 TRI in the past year, giving an average return of 42%.
Top-performing funds and their returns
HSBC Business Cycles Fund has given an astounding 56.3% return in the last one year, followed by Mahindra Manulife Business Cycle Fund (56.17%) and Quant Business Cycle Fund (50.8%).
The three funds have beaten the benchmark by 15-21% points.
Other top performers include Baroda BNP Paribas Business Cycle Fund (44.58%), Kotak Business Cycle Fund (40.03%), Axis Business Cycles Fund (39.02%), Aditya Birla Sun Life Business Cycle Fund (36.33%) and HDFC Business Cycle Fund (31.97%).
Continued momentum and expert insights
Over the past six months, top-performing business cycle funds have continued to ride the wave.
HSBC Business Cycles Fund returned 26.72%, Mahindra Manulife Business Cycle Fund returned 20.88%, and Quant Business Cycle Fund delivered 17.7%.
Siddharth Alok-AVP Investments, Multi Ark Wealth at Epsilon Group, said these funds are attracting attention due to high returns in a short span.
He credited strong performance in select sectors/themes, especially infrastructure and manufacturing.