Mahindra Manulife is launching its Business Cycles Fund which will aim to identify sectors that are in the early and mid stages of their economic cycles and well positioned in their market cycles.
The AMC’s presentation deck brings out vividly the need to identify sectors at the right time with examples such as financials vs FMCG, autos vs metals etc.
Krishna says that this fund is to the sectoral segment of equity funds what flexicap funds are to cap-based equity funds. Just as an investor can choose independently to invest in small, mid or large cap funds or can delegate this to a fund manager through a flexicap mandate, so can these investors either choose to invest independently in different sectors and themes or delegate this responsibility to a fund manager through a business cycles fund– which is nothing but a flexi sector fund.
The fund will have a cap of 40% to any one sector. Krishna expects about 7 to 8 out of the 15 sectors in the market to find reasonable representation in the new fund. To this extent, expect a reasonably high active share.
Investment horizon will be 12-18 months, in keeping with the theme of sector identification and nimble sector rotation. From this perspective, Krishna is happy to take exposures in FMCG, metals and IT – all of which can see some tailwinds coming in the next 6-12 months.