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Infrastructure Mutual Funds

Infrastructure Funds invest predominantly in stocks of companies engaged in the infrastructure sector. Due to investment in a single sector, these funds witness a high risk of concentration.

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List of Infrastructure Mutual Funds in 2022

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Fund name
AUM
1Y CAGR
3Y CAGR
Till Date CAGR
icici-prudential-logo
ICICI Prudential Infrastructure Fund (G)

1893.205 Cr

13.3%

14.3%

13%

sbi-logo
SBI Infrastructure Fund (G)

794.526 Cr

5.6%

13.2%

5.7%

sundaram-logo
Sundaram Infrastructure Advantage Fund (G)

589.046 Cr

2.1%

10.7%

9.4%

uti-logo
UTI Infrastructure Fund (G)

1368.179 Cr

-1.5%

7.9%

11.7%

l-and-t-logo
L&T Infrastructure Fund (G)

1309.122 Cr

4.3%

10.2%

5.2%

Invesco_Fav_icon-logo
Invesco India Infrastructure Fund (G)

423.804 Cr

6.1%

17.5%

7.3%

quant-logo
Quant Infrastructure Fund (G)

573.364 Cr

10.7%

29.1%

4.4%

reliance-nippon-life-logo
Nippon India Power & Infra Fund (G)

1638.013 Cr

1.5%

11.1%

15.5%

tata-logo
Tata Infrastructure Fund (G)

820.135 Cr

7.2%

13%

12.9%

franklin-templeton-logo
Franklin Build India Fund (G)

1069.755 Cr

2.8%

10.8%

14.7%

idfc-logo
IDFC Infrastructure Fund (G)

610.014 Cr

-3.7%

10.2%

6.5%

Aditya_Birla_Fav_icon-logo
Aditya Birla Sun Life Infrastructure Plan A (G)

507.932 Cr

-4.3%

9%

9.2%

kotak-mahindra-logo
Kotak Infrastructure & Economic Reform Fund Standard Plan (G)

544.311 Cr

11.8%

14.4%

8.1%

canara-robeco-logo
Canara Robeco Infrastructure fund (G)

202.247 Cr

9.6%

14.5%

12.3%

taurus-logo
Taurus Infrastructure Fund (G)

4.932 Cr

-2.9%

12.2%

8.4%

hdfc-logo
HDFC Infrastructure Fund (G)

546.46 Cr

4.9%

3.6%

-

lic-logo
LIC MF Infrastructure Fund (G)

82.359 Cr

8.9%

11.7%

5.1%

hsbc-global-logo
HSBC Infrastructure Equity Fund (G)

113.795 Cr

2.3%

10.1%

5.2%

sahara-mutual-fund-logo
Sahara R E A L Fund (G)

3.577 Cr

-26.1%

-6.3%

3.4%

sahara-mutual-fund-logo
Sahara Infrastructure Fund Fixed Pricing (G)

4.503 Cr

-26.3%

-7.5%

4.7%

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What are Infrastructure Mutual Funds?

Infrastructure funds are thematic funds that invest in infrastructure development businesses. There are various sub-sectors under the infrastructure theme. Metals, power, energy, estate, cement, etc., are some of the sub-sectors that form part of the infrastructure theme.

The funds aim to profit from India’s growing economy. Infrastructure funds intend to invest primarily in companies that have the potential to generate long-term value from their infrastructure projects.

The energy mutual funds invest at least 80% of their net assets in equity/equity-related instruments of infrastructure companies that are involved in infrastructure development, either directly or indirectly. The market movements have a significant impact on the performance of infrastructure funds. Thus making the investments highly volatile. However, having a long term investment horizon will help you generate significant returns. Although some of the finest infrastructure funds have delivered exceptional returns, the category is best suited to seasoned investors.

Investing in infrastructure funds gives an opportunity to participate in the future wealth creation process of India’s markets. The sector can generate significant returns due to favorable government development programs and investments.  

Infrastructure funds are often cyclical and volatile. There could be significant rallies in response to economic recovery and supportive government initiatives. However, there may be extended periods of underperformance. To get the most out of the category, you need to have a long term investment horizon.

The infrastructure sector mutual funds are open-ended equity schemes and therefore are suitable long term investment options. Thus, infrastructure funds can be highly volatile in the short term. Moreover, investors who have an in-depth understanding of the infrastructure sector and can track it closely should only consider investing in infrastructure funds.

Best Infrastructure Mutual Funds in India 2022

Fund Name1 Year Returns3 Year Returns5 Year ReturnsSince Inspection
IDFC Infrastructure Fund (Growth)23%14%8.9%7.6%
L&T Infrastructure Fund (Growth)30.4%14%11%6%
UTI Infrastructure Fund (Growth)13.7%12.2%9%12.4%
Quant Infrastructure Fund (Growth)53.1%33.2%22.4%5%
HDFC Infrastructure Fund (Growth)23.1%5.2%2.7%NA
ICICI Prudential Infrastructure Fund (Growth)34.7%17.5%12.4%13.6%

Growth Drivers

  • High Demand for Commercial Spaces: Construction of office buildings, hotels, retail stores, and entertainment facilities. In 2020, the net office space absorption in India’s six major cities was 31.9 million square feet. Furthermore, tech majors and other MNCs are looking at India for opening their international data centres and offices. These opportunities are going to boost India’s infrastructure industry.
  • Smart Cities: Revolutionary schemes such as building 100 smart cities is a good way forward for India. Through smart cities, the country expects to improve the quality of life for its citizens. It aims to offer modernised and technology-driven facilities as part of its urban planning programs.  
  • Mega Ports and Industrial Corridors: India plans to build 14 CEZs, 6 new ports, three mega ports and 11 industrial corridors.
  • Road and Railways: As per the Union Budget 2022, India is envisioning massive developments of roads and railways. Over the next three years, 100 PM Gati Shakti Cargo terminals will be built as part of the rail connection. Similarly, the country plans to expand its National Highways network by 25,000 kilometres this year. The expansion proposal is about double the maximum accomplished in any of the previous five years.
  • Good Investment Opportunities: India has a great scope for development and thus offers good investment opportunities. Following are some investment opportunities:
    • Development of residential, hospitality, commercial, retail, and township projects.
    • Construction of bridges, roads and railway infrastructure.
    • Development of technology and solutions for smart and sustainable cities/ townships.
    • Promoting technologies to develop low cost and affordable housing.
    • Use of environment-friendly and sustainable building materials.
    • Training and skill development for all workers in the sector.
    • Water supply and sewage treatment.

Advantages of Investing in Infrastructure Mutual Funds

Following are the advantages of investing in infrastructure funds:

  • Good Potential: India is heavily investing in infrastructure projects. The infrastructure sector offers a good potential to generate significant returns in the long term. With a large number of development projects, the sector looks bright. As a result, infrastructure funds are witnessing high inflows and are generating good returns.
  • Long Term Capital Appreciation: Infrastructure funds identify long-term growth potential companies. Infrastructure funds invest in companies with strong financials. Since infrastructure funds are pure equity schemes, a long-term investment horizon is necessary to enjoy significant returns.
  • Diversification: Infrastructure mutual funds invest in companies that deal in infrastructure development and management. Furthermore, they also invest in other related sub-sectors such as cement, steel, infrastructure technology, power, etc. Therefore, you can achieve good diversification with these funds.
  • Professional Management: If you are interested in investing in the infrastructure sector, it can often be difficult to identify stocks and invest in them. Infrastructure sector mutual funds are a good alternative. Since the fund manager focuses on selecting infrastructure stocks, you can leverage their expertise and invest in the fund.

Who Should Invest in Infrastructure Mutual Funds?

Consider investing in infrastructure funds if you wish to seek exposure to the infrastructure sector and its sub-sectors. Infrastructure mutual funds are suitable for seasoned investors. Since these funds invest across multiple sectors, they offer good diversification to your investment portfolio. If you wish to invest and benefit from the infrastructure development projects, you can invest in these schemes.  

Infrastructure mutual funds are equity schemes. Therefore, a long-term investment horizon is necessary to average out the market volatility. Infrastructure thematic funds follow a particular theme and, hence, are highly volatile in the short term. Though the funds invest in high-quality stocks, the markets are cyclical. And, also the sector. The infrastructure sector has witnessed highs and lows. Therefore, the infrastructure portfolios are highly sensitive to the movements. As a result, only invest if the risk levels are comfortable for you. Furthermore, since infrastructure funds focus on one single theme, exposure of more than 10% to your portfolio is not advisable.

How to Select Infrastructure Mutual Funds for Investment?

The infrastructure sector is in focus, and the opportunities are bright; however, you should be careful while choosing a scheme to invest in. Following are some parameters that will help you select the best infrastructure mutual fund for investment:

Infrastructure Sector Outlook

The government of India is focusing on the infrastructure sector. India intends to invest heavily in infrastructure development in order to ensure the country’s long-term prosperity. From 2018 to 2030, the government proposes investing USD 750 billion in railway infrastructure.

As part of the infrastructure development plans, the government plans to allocate INR 100 lakh crore towards developing a master plan for multi-modal connectivity. Through the connectivity development project, the government aims to lower the logistics costs and foster economic growth. 

Furthermore, India joins hands with foreign associates to improve the country’s infrastructure. As part of the vision, India partners with Japan to improve infrastructure in the north-eastern states. They set up the India-Japan Coordination Forum for Northeast Development to carry out important infrastructure projects in the region.

Historical Performance

The historical performance of an infrastructure fund doesn’t guarantee future returns. However, analyzing the infrastructure fund’s returns against its benchmark and peers will help you understand its performance. You can analyze the infrastructure fund’s performance over different market cycles by looking at its historical performance. Always choose infrastructure mutual funds that have consistently outperformed their benchmark and peers.

Investment Objective

Infrastructure mutual funds are designed to take advantage of the developments and sector’s long-term growth potential to build long-term wealth. The fund manager handpicks the infrastructure sector stocks on the basis of the company’s track record, management, growth prospects, and overall industry situation. Furthermore, efforts are taken to maintain the portfolio is diversified within the infrastructure sector to ensure minimum risk.

Investment Horizon

Infrastructure mutual funds are equity schemes and therefore require a long-term investment duration to generate significant returns. Infrastructure schemes can be highly volatile in the short term. Consider investing in an infrastructure fund only if you have a long-term investment horizon, and understand the sector well.

Suitability

Infrastructure mutual funds are meant for aggressive and seasoned investors who seek infrastructure sector exposure to their portfolios. These funds help you diversify your investment portfolio across the infrastructure sector. Though the portfolio is well-diversified, your investments are subject to volatility. To average out the market volatility, a long-term investment horizon is necessary. As a result, consider whether the infrastructure sector theme and funds are appropriate for your investment portfolio, objectives, and time horizon.

Asset Allocation

Infrastructure mutual funds offer good diversification within the theme. With diversification, you can manage the market’s volatility better. Following a particular theme always restricts the investment options. However, the fund manager has the liberty to explore infrastructure stocks across market capitalization. Thus, giving the benefit of investing in high-value equities. As a result, search for infrastructure funds that have a well-balanced exposure to the sector.

The infrastructure sector is critical to the growth of other industries as well as India’s economic development. As a result, the government concentrates on infrastructure, construction and development through FDI policies, significant budget allocations to the sector, and Smart Cities Mission. However, markets move in cycles, and so does the infrastructure sector, sub-sectors and the companies. The funds experience prolonged underperformance or significant rallies. Therefore, if you are an investor who understands the infrastructure theme in-depth and is willing to undertake the volatility, you can consider investing in infrastructure mutual funds.