Should you invest in transportation and logistics funds?
Aditya Birla Sunlife Mutual Fund has recently launched Transportation and Logistics Fund. This is a thematic fund. How are thematic funds for investment, who should invest?
Demand from markets including e-commerce, fast-moving consumer goods (FMCG), retail, chemicals, pharmaceuticals, and industrial goods is expected to drive annual revenue growth in the industry to 6-9%. Aditya Birla Sun Life Mutual Fund has launched the Transportation and Logistics Fund. The NFO opened on October 27, 2023, and closed on November 10, 2023.
Let’s take a look at what are Transportation and Logistics Funds:
A Transportation and Logistics Fund invests 80% to 100% in the Transportation and Logistics theme companies. The stock holdings of these funds are a mix of transportation and logistics companies. A Transportation and Logistics Fund is a thematic equity mutual fund that invests at least 80% of its assets in equities related to a specific theme. These are funds that adhere to a particular theme and are typically more diversified than sector-specific funds. The category includes various consumption-related segments, including FMCG, logistics, automobiles, telecommunications, consumer durables, defense, ESG, etc.
The fund managers use a combination of top-down and bottom-up approaches to identify sectors anticipated to benefit from a specific theme. Fund managers will search for opportunities across market capitalisations to generate potential capital growth over the long term. The Transportation and Logistics thematic funds fall under the equity category of mutual funds; hence, they are taxed like equity mutual funds.
If you redeem before one year, returns are subject to a 15% tax. After a year, you must pay a 10% long-term capital gain tax on returns of Rs. 1 lakh or more in a fiscal year.
Returns of Transportation and Logistics Fund
Presently, apart from Aditya Birla Sun Life Transportation and Logistics Fund, there are only four players in this theme, and UTI Transportation and Logistics Fund is the oldest fund. On average, the funds have given a return of 20% in the last one year as per Ace mutual fund as of November 3, 2023.
Aditya Birla Sun Life Transportation and Logistics Fund is benchmarked against Nifty Transportation and Logistics TRI. Currently, the Nifty Transportation and Logistics TRI has given a CAGR return of 19.2% as of November 3, 2023.
Should you invest?
Today, the Auto Component Industry in the last 10 years has grown tremendously due to robust domestic vehicle sales, strong aftermarkets, and increasing exports. Similarly, presently, India’s logistics per capita spend is at USD280, which is very low, and thus, this offers growth potential to investors in the coming times.
That said, Thematic equity mutual funds have very high risk attached to them. So, only experienced investors who know the sector should invest in such funds. The fund is suitable for investors with an investment horizon of 3 years and above.
Conclusion
For experienced investors, thematic funds are advised, with only 10% of the total portfolio invested in this type of fund. That being said, if an investor is particularly optimistic about the promise of such thematic funds, he can invest with the help of a financial advisor, but only after analysing all of the cons of such thematic funds.
(Disclaimer: Stocks recommendations by experts or brokerages are their own and not those of the website or its management. Money9.com advises readers to check with certified experts before taking any investment decisions.)