Amid a rush on new fund offers (NFOs) launches, Axis AMC on Thursday said that active mutual funds based on narrow and non-structural themes are a concern as they run a high risk of going out of favour.
“When we look at thematic, there are 2 considerations. It should be a long-term theme and broad-based enough that a fund manager can provide consistent returns,” said Ashish Gupta, chief investment officer of Axis MF.
Out of 20 active equity/hybrid schemes launched in the first four months of FY25, 13 are sectoral/thematic funds, according to the data from the Association of Mutual Funds in India (Amfi). Apart from this, sectoral/thematic funds have picked pace even in the passive space.
“The narrow themes, in our view, is a concern. When the sector/segment goes out of favour, the active managers have very little leeway to provide better experience to investors,” Gupta said.
The fund house’s managing director and chief executive officer B Gop Kumar also shared a similar view. “We are very clear about our thematic funds. It has to be multi-decadal. We don’t want to do narrow theme/sector. This can be done through passives,” he said.
On the Axis Consumption Fund, the fund house said it is a sector that has demonstrated long term return potential and at the same time has witnessed lower drawdowns during down cycle. “This makes it an important diversifier in an investor’s portfolio,” it said.
The new fund will open for subscription on August 23 and close on September 6, and will be benchmarked against Nifty India Consumption index.