Business Cycle Funds are like roller coaster rides where each twist and turn represents a phase of the economy. Generally, Business cycles have four phases that are Expansion, Peak, Contraction and Trough. Within a sector, companies can be in different phases of the business cycle.
During expansions, the economy is growing in real terms, excluding the effects of inflation. This growth is evidenced by increases in indicators such as employment, industrial production, sales, and personal incomes. Conversely, during contractions, the economy is shrinking, as reflected by declines in these same indicators.
Business cycle funds or sector rotation funds are mutual funds that aim to capitalize on the different phases of the business cycle. These funds tend to allocate their investments across a few sectors or asset classes based on their expectations of economic conditions.
Based on changes in economic indicators and the business cycle, these funds rotate between sectors to maximize gains and minimize risk.
Buckle up as we dive into the details of one such business cycle fund: the “Motilal Oswal Business Cycle Fund.” This fund could be a compelling option for those interested in business cycle investing.
Details of Motilal Oswal Business Cycle Fund
Motilal Oswal Business Cycle fund is launched as an NFO and is open for subscription from 7th August 2024 to 21st August 2024.
It is an open-ended sectoral/thematic equity scheme aligned with the business cycle investing theme and the fund is released by the promising mutual fund house Motilal Oswal AMC.
The fund considers “NIFTY 500 TRI” as its Benchmark Index.
Investment objective of NFO fund
The investment strategy focuses on generating wealth by investing in companies through dynamic allocation between various sectors and stocks at various stages of the business cycle.
Let’s have a quick look at the key basic details of the fund:
Portfolio Construction
The fund aims to invest 80%-100% in equity instruments selected based on the business cycle theme, 0%-20% in other equities, debt, and money market instruments, and 0%-10% in REITs and InvITs.
Navigating the Risk and Returns
Motilal Oswal Business Cycle Fund is a sectoral/thematic fund, which means it carries a very high-risk profile but also has the potential to generate higher returns for its investors.
As of 7th August 2024, the NIFTY 500 TRI has delivered returns of 35.26%, 19.05%, and 22.12% over 1-year, 3-year, and 5-year periods, respectively. Since this is the fund’s benchmark, the goal of this fund is to meet or exceed these benchmark returns.
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Motilal Oswal Asset Management Company
Motilal Oswal Asset Management Company Ltd. is a Mumbai-based AMC that was incorporated on November 14, 2008. The AMC is promoted and sponsored by Motilal Oswal Financial Services Ltd. (MOFSL).
Currently, the AMC manages assets worth ₹92,650 crores and operates across over 600 locations in the country. It has a team of 30+ experienced investment professionals and serves approximately 24.98 lakh client accounts.
Meet the Fund Management Team
The fund is managed by a team of seasoned professionals with significant experience. The management team includes Niket Shah, Ajay Khandelwal, Rakesh Shetty, Santosh Singh, and Atul Mehra.
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Who should Invest in this NFO?
Investors seeking very high returns and with a very high-risk appetite can consider the Motilal Oswal Business Cycle Fund.
This fund allows investors to benefit from the different phases of the business cycle within sectors.
This scheme is best suited for those looking for capital appreciation over the long term, willing to invest for more than 5 years and interested in adding equities selected based on the business cycle.
