Invesco Business Leaders Fund. Invesco Business Leaders Fund: Promising new kid on the block

Worried about the roller-coaster market repeating itself in 2017? Well, one way to beat market volatility is by increasing allocation to the less-turbulent large-cap funds. For those willing to look beyond the old warhorses, there are a few new kids on the block with a good track record. That is, if you have the appetite for moderately high risk. Invesco India Business Leaders Fund is one such fund you can consider.

Launched in August 2009, the fund struggled during January 2011-13 due to a high cyclical slant. For instance, it was overweight on metals and power stocks at a time when the BSE Metal Index and BSE Power Index lost over 30 per cent. Likewise, the fund was underweight on defensive themes such as healthcare and FMCG, which delivered stellar returns during this period.

Though the fund could not make the most of the initial leg of the September 2013-March 2015 rally, it rebalanced its portfolio by July 2014 to increase exposure to pharma, IT and banking stocks. This helped the sharp turnaround in the performance beginning July 2014. The fund has consistently beaten its benchmark Nifty 50 Index since then.

Even though the fund has had brief periods of under-performance, its point-to-point performance across up and down cycles has been better than the benchmark. For instance, during the January-August 2013 period, even as Nifty 50 Index shed about 13 per cent, the decline in the fund’s NAV was lower at 12.2 per cent. Similarly, during rallies also, the fund’s returns have been higher than its benchmark’s. Between August 2013 and March 2015, the Nifty 50 Index gained 70 per cent but the fund raked in 87 per cent gains. Though the fund’s five-year rolling return is a tad lower at 80 per cent, due to under-performance during the 2011-13 period, it has improved significantly in the last three years.

The scheme’s daily one-year return in the last three years was better than its benchmark 90 per cent of the time.

Invesco India Business Leaders Fund’s expense ratio is at 2.5 per cent, higher than that of peers such as ICICI Prudential Focussed Bluechip and Birla Sunlife Frontline Equity. This is also possibly due to its relatively small assets under management of ₹120 crore as of November 2016. The fund ranks in the top quartile on a risk-adjusted returns basis, with beta of 0.94 and sharpe ratio of 0.78.

While the fund has outperformed its benchmark Nifty 50 Index over a three- and five-year time frame, its one-year return has been a tad lower than its benchmark. This was largely on account of its weak performance over the last three months. The fund’s big bets in the auto space suffered a temporary setback due to demand slowdown on account of demonetisation and this impacted performance. Though the fund has marginally reduced exposure to this space, it still held over 18 per cent of its assets in auto stocks as of November 2016. Given the healthy long-term prospects for the auto industry, the temporary weakness in this space may not be a cause for concern.

COMMENT NOW