Infrastructure Funds are a type of sectoral equity funds, that specifically cater to firms that are, directly or indirectly related to the infrastructure sector. Being a sectoral fund, the risk on investment for these funds is quite high, but the return potential is also high.
With the government’s increased focus on infrastructure development in the country, this sector offers a myriad of opportunities to investors for substantial capital appreciation. It is the best time to leverage the growth potential of the infrastructure sector in India.
Top 5 Infrastructure Funds to Invest
Here is a list of top 5 Infrastructure Funds you can invest in 2020 to generate quality returns. It should be noted that the 5 -Year Returns of the following funds, might not look attractive, owing to recent economic slowdown which led to many infrastructure projects being stalled. However, over a tenure of 7 years, the funds have delivered impressive returns, and are expected to give better returns in the future.
| Fund Name | AUM (cr.) | 5-Year Returns | 7 – Year Returns |
| Franklin Build India | ₹1,083 | 1.00% | 13.63% |
| Invesco India Infrastructure | ₹42 | 1.22% | 12.62% |
| L&T Infrastructure | ₹1,467 | 1.23% | 10.99% |
| Kotak Infra & Eco Reform | ₹313 | 0.02% | 10.26% |
| SBI Infrastructure | ₹460 | 0.71% | 7.76% |
{Note: Funds have been ranked on the basis of 7 year returns}
{Data as on March 23, 2020; Source: Value Research}
1. Franklin Build India Fund
An open-ended equity scheme, Franklin Build India Fund allocates its assets to companies that are engaged, whether directly or indirectly, in infrastructure-related activities.
| Returns | 5 – Year Returns | 7 – Year Returns |
| Fund | 1.00% | 13.63% |
| Benchmark | -1.09% | 7.79% |
If you would have invested ₹1 lakh in this fund 7 years ago, the accumulated corpus would have been ₹2.44 lakh (considering 13.63 CAGR, as of March 23, 2020)
- The fund does not cater to any specific market capitalization, but diversifies the investment portfolio across large cap, mid cap and small cap stocks.
- The fund is suitable for investors who want to invest with the objective of long term capital appreciation and wealth creation.
2. Invesco India Infrastructure Fund
The fund invests in equity and equity-related instruments of companies catering to the infrastructure sector.
| Returns | 5 – Year Returns | 7 – Year Returns |
| Fund | 1.22% | 12.62% |
| Benchmark | -1.09% | 7.79% |
If you would have invested ₹1 lakh in this fund 7 years ago, the accumulated corpus would have been ₹2.29 lakh (considering 12.62 CAGR, as of March 23, 2020)
- The fund has a diversified portfolio in terms of market capitalization, with about 28% assets allocated to large cap, 40% to mid cap and 30% to small cap companies, operating in the infrastructure sector.
- Over the years, the fund has always fared well when compared to its category peers and the benchmark, even though the total Assets Under Management are lower than the other funds from the category.
3. L&T Infrastructure Fund
L&T Infrastructure Fund is an open-ended equity scheme that predominantly invests in equity and equity-related instruments of companies in the infrastructure sector.
| Returns | 5 – Year Returns | 7 – Year Returns |
| Fund | 1.23% | 10.99% |
| Benchmark | -1.09% | 7.79% |
If you would have invested ₹1 lakh in this fund 7 years ago, the accumulated corpus would have been ₹2.07 lakh (considering 10.99 CAGR, as of March 23, 2020)
- The fund invests in those companies that could benefit from the government’s initiatives and push to the infrastructure, construction projects, capital goods products, cement and other value creators.
- It is advisable to have a long term investment horizon (6-7 years) for investment in this fund, as the underlying securities are quite sensitive to market fluctuations.
4. Kotak Infrastructure & Economic Reform Fund
It is an infrastructure fund that primarily invests in equity securities of companies involved in the economic development of India.
| Returns | 5 – Year Returns | 7 – Year Returns |
| Fund | 0.02% | 10.26% |
| Benchmark | -1.09% | 7.79% |
If you would have invested ₹1 lakh in this fund 7 years ago, the accumulated corpus would have been ₹1.98 lakh (considering 10.26 CAGR, as of March 23, 2020)
- With largest allocation to industrial manufacturing, this fund aims to leverage the high growth potential the firms involved in manufacturing offers. Firms involved in construction business form the second largest portfolio allocation.
- The fund has a diversified portfolio in terms of market capitalization, with around 30% assets invested in large cap, 40% in mid cap stocks and around 28% in small cap firms.
5. SBI Infrastructure Fund
An open-ended sectoral fund that aims to generate optimal returns with investment in high growth stocks in the infrastructure sector.
| Returns | 5 – Year Returns | 7 – Year Returns |
| Fund | 0.71% | 7.76% |
| Benchmark | -1.09% | 7.79% |
If you would have invested ₹1 lakh in this fund 7 years ago, the accumulated corpus would have been ₹1.68 lakh (considering 7.76 CAGR, as of March 23, 2020)
- The fund’s equity investment is largely skewed towards large cap companies that provide stability to the portfolio returns.
- The flexibility of the fund to invest 20% of its assets in equities other than those operating in the infrastructure fund. This tones down the losses incurred by the remaining portfolio when the infrastructure sector is not performing well.
Who should invest in Infrastructure Funds?
- An investor should have a high risk tolerance for investing in these schemes, as the returns are solely dependent on the performance of one single sector, i.e, the infrastructure sector.
- Before investing in these funds, an investor should do a thorough analysis of the current and future market scenario and growth prospects of the companies in the infrastructure sector. The investment decision should be based on return potential of the sector.
- It is important to have a long-term investment horizon (at least 6 years) for this investment, as the equity securities are quite sensitive to market fluctuations in the short run.
- You can also look at the CRISIL rank of the funds while making your investment decisions, as it gives an idea about the overall performance of the funds over the years, based on their historical returns data and portfolio attributes.
How to invest?
There are two ways through which a person can invest in Infrastructure Funds:
- Online
You can invest in Infrastructure Funds online seamlessly through online platforms (such as Paisabazaar.com) or directly through the websites of the Asset Management Companies (AMCs), offering the fund.
- Offline
This conventional mode of investment requires an investor to fill a form and submit it at the nearby branch of the fund house, or invest through a broker.
To know more about the investment procedure for mutual funds, visit: How to invest in Mutual Funds?