Infrastructure Funds: Should you invest in Infrastructure Funds?: Finance Trading Times

Infrastructure Funds: Should you invest in Infrastructure Funds?

You may have seen a lot of funds coming to the markets with their NFO recently - So many of them. Why are there so many funds coming in at this moment?
One reason may be tax savings ad this is the taxing time for the Indian markets. But not all funds give tax benefits. The funds have a lot of variety, ELSS, etc., but the primary domain in which the new funds are being offered is the Infrastructure funds domain.

These infrastructure funds are the ones which invest in the infrastructure companies, either on national or global basis and attempt to benefit from the infrastructure improvement, thereby looking for price appreciation in the infrastructure company stocks in which these funds have invested the investors’ money.

Another reason why so many new funds are coming to the market is due to the recent turmoil in the markets in December-February period, where markets went down at global levels, shattering the trusts of individual investors. Hence the same individual traders and investors are now seeking for professional advice or so called professional money management. How well the fund managers are able to manage the money professionally, is already covered with details in this article

Another reason is the norms setup by regulatory authorities. The regulatory authorites do not allow fund houses to come out with a similar version of a fund which they have already introduced in the past. May be the following sounds familiar to you:
• Growing Economies Infrastructure Fund
• Banking & Infrastructure Fund
• Infrastructure Fund Series 1
• Infrastructure & Economic Reform Fund
• Infrastructure Advantage Fund
• Agri & Infra Fund
• Global Infrastructure Fund
• Small & MidCap Infrastructure Fund
• Infrastructure & Real Estate Fund

As rediff website has pointed out, “Never before have we seen so much 'variety', revolving around a particular investment theme” & “what will happen when fund houses run out of innovative names for their infrastructure funds. We quickly realised that some of them have already planned for this. . . . there will be Series 1, Series 2, Series 3 and so on and so forth!”

Ultimately, with so many funds hitting the markets, the investors have a lot of choice. The same is backed by the ever growing demand of Infrastructure. The promise of the growth story, the next emerging market, the next emerging economy, and so on.
However, we should not forget that there are global signals of a recession- which will definitely hit the Indian growth story. The growth rate of 9% is not easily achievable.

Another thing that these funds claim is that there are lot of Infrastructure companies coming to India and working in India, hence there will be loads of opportunities to benefit from the profits if we invest in these infrastructure companies. However, one should not forget that the more competitive a sector becomes, the more difficult it is to make money from the stocks. When the sector itself is full of competition, then obviously the profits will be shared between various companies. Which company will get what share, no one knows. How will the fund manager select the best performing infrastructure companies, there is no guarantee of anything.

I should not miss out on mentioning the case of Emaar MGF IPO, which was cancelled because of this recent market turmoil.
A union of a Dubai based construction company and an Indian counterpart, the IPO failed miserably and succumbed to market pressure and had to be cancelled. Things work randomly. Therefore, let’s not just get fascinated by the jazzy names and titles of the various NFO that are hitting the markets. No sector can grow forever, no company can continuously make profits, no country can have a consistent growth record. Invest wisely and with caution. All the best! Table of Contents
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