Thematic funds gain in popularity as returns rise

After conventional equity funds captured investor interest in the past year it is now the turn of thematic funds, which are receiving similar attention thanks to strong returns and the distinct features they offer vis-à-vis their large-cap peers.

Over the past year thematic funds have provided average returns of 52.27 per cent, shows the data from Value Research, compared with 45.88 per cent for their large-cap peers.

Within the thematic category, funds like ICICI Prudential Commodities and Edelweiss Recently Listed IPO funds have provided even greater returns of 122.56 per cent and 72.89 per cent, respectively. Themes like manufacturing, services, and business cycle have also done well.

“Several of those funds have exposure to mid- and small-cap stocks, which have helped them deliver better returns. Apart from that, in terms of our economy we have done quite well and are recovering from the second wave of Covid-19 very fast,” said Sunil Subramaniam, MD, Sundaram MF.

Sundaram Services Fund and ICICI Prudential Manufacture in India have given returns of 69.27 per cent and 57.41 per cent, respectively.

“Improvement on the coronavirus situation and pickup in the vaccination drive have provided some comfort to investors. Small-caps and thematic funds have been the preferred choice for retail investors as they emerged the biggest beneficiaries in July,” said Gautam Kalia, head of investment solutions at Sharekhan by BNP Paribas.