19 April 2015

Thematic – Infrastructure

Infrastructure funds are part of a mutual fund category called thematic funds.

Infrastructure mutual funds are those which invests in stocks that either directly or indirectly involved in Infrastructure development. Companies which are into Energy, Real Estate, Power, Metal etc. would fall under Infrastructure sector. Companies like Banking, Finance, Transportation, etc. would contribute indirectly to Infrastructure development. Infrastructure mutual funds would invest in all these stocks.

While Sectoral funds invest in particular sectors like, say, information technology, power, metals, oil and gas, etc., thematic funds invests in themes like infrastructure, consumption-led categories like the retail industry and outsourcing companies.

Infrastructure, as a theme, covers several sectors like power utilities, power equipment and construction companies. Unlike technology sector mutual funds infrastructure funds are not restricted to a few sectors.

From a risk point of view, a thematic fund carries less risk than a sectoral fund. The reason being, it’s focused on only two to three sectors. If these sectors do well, so will the fund. But, if these sectors suffer, the fund will suffer too as it lacks diversification. Since thematic funds have a little more diversification they are less risky than sectoral funds.