Business cycle refers to the cyclical movement between periods of prosperity and despair in the economic activity of a country. These cycles come in phases that can last from a few months to as long as a couple of years.
Expansion: A sector or an economy is going through a cycle of high growth.
Peak: The expansion phase reaches its highest level, and the growth stabilizes.
Contraction: The growth in the sector or the economy starts to decline.
Slump: The growth hits its lowest point and then stabilizes at that level.
Each of these phase favours growth in different sectors and opens different cyclical opportunities which calls for a unique investing style – ‘Business cycle-based investing’. It has been observed that over a period, stock returns are largely driven by cyclical factors tied to macro-economic factors and hence corporate earnings.
The business cycle funds are a good option for investors to invest and benefit from the shifts in business cycles. Such funds follow a concentrated portfolio approach, which means that any positive news from emerging sectors will help boost returns significantly. On the other side, any negative news from these sectors will hurt the returns if not anticipated in advance. Aditya Bila SL mutual fund has launched Aditya Birla SL Business Cycle Fund. It is an open ended equity scheme following business cycles based investing theme.
Details of Aditya Birla SL Business Cycle Fund
Type-An open-ended equity scheme following business cycles based investing theme.
Category-Thematic Fund
Investment Objective-The investment objective of the scheme is to provide long-term capital appreciation by investing predominantly in equity and equity related securities with a focus on riding business cycles through dynamic allocation between various sectors and stocks at different stages of business cycles in the economy. The Scheme does not guarantee/indicate any returns. There can be no assurance that the objective of the Scheme will be achieved.
Min. Investment-Rs 500 and in multiples of Re 1 thereafter. Additional purchase Rs 500 and in multiples of Re 1 thereafter.
Face Value-Rs 10/- per unit
Options
- Growth
- Income Distribution Cum Capital Withdrawal Option (IDCW)
Entry Load-Not Applicable
Exit Load
- For redemption / switch-out of units on or before 365 days from the date of allotment: 1.00% of applicable NAV.
- For redemption / switch-out of units after 365 days from the date of allotment – Nil
Benchmark Index-S&P BSE 500 TRI
Issue Opens-November 15, 2021
Issue ClosesNovember 29, 2021
- For redemption / switch-out of units on or before 365 days from the date of allotment: 1.00% of applicable NAV.
- For redemption / switch-out of units after 365 days from the date of allotment – Nil
The investment strategy for Aditya Birla SL Business Cycle Fund will be as follows:
Aditya Birla SL Business Cycle Fund will predominantly invest in Indian equity and equity related securities with focus on riding business cycles through dynamic allocation between sectors and stocks at different stages of business cycles in the economy.
The fund house will hold Growth at Reasonable Price (GARP) philosophy, to achieve the long-term capital appreciation. The scheme will follow top down approach of portfolio construction to identify stage of business cycle, sector opportunities and subsequently using bottom up approach to identify strong companies within those sectors.
The scheme would aim to deploy the business cycle approach in investing by identifying economic trends and investing in the sectors and stocks that are likely to outperform at any given stage of business cycle. The fund manager will consider economic parameters (like Current Account Deficit, fiscal deficit, interest rates, inflation) investment indicators (like investment in capex, new projects cleared, etc.); business and consumer sentiment (purchasing manager index, business confidence index, sales of various consumer discretionary products, etc.) to decide on the expansion or the contraction phase.
The stock selection of the scheme would emphasize on identifying companies with sound corporate managements and prospects of good future growth. The fund managers will favour companies that offer the best value relative to their respective long-term growth prospects, returns on capital, and management quality.
Who will manage Aditya Birla SL Business Cycle Fund?
Mr Vineet Maloo, Mr Nitesh Jain and Mr Vinod Bhat (for overseas investments) would be the designated Fund managers for this scheme.
Fund Outlook – Aditya Birla SL Business Cycle Fund
Aditya Birla SL Business Cycle Fund aims to invest in dynamic allocation between various sectors and stocks at different stages of business cycles in the economy.
The scheme will make your portfolio conscious of business cycles, as different cyclical phases tend to favour different sectors. By focusing on identifying these opportunities in advance, this fund has the potential for growth through all business cycles.
The scheme offers investors flexibility and diversification in their portfolio by investing across all market sectors, themes, and market caps. The fund also has the flexibility to invest in select and favourable global opportunities, giving you the potential exposure to global markets as well. The fund managers will endeavour to pre-empt cyclical changes and opportunities in finding industry leaders to maximise potential of growth for investors.
However, being a thematic fund, this scheme will focus on investing in opportunities arising out of various stages of business cycles. This could limit the capability of the fund with a concentrated exposure towards few sectors, thus making it a risky proposition for investors. Also, it depends on the fund manager’s ability to effectively identify the shifts in business cycles and swiftly capture the opportunities across various sectors and stocks at the right time, which remains to be seen.
Aditya Birla SL Business Cycle Fund is suitable only for investors having high-risk appetite and long-term investment horizon of at least 5-7 year to survive the market volatility. Before taking an investment decision, you should ensure that your investment objective is aligned with the fund.
Mutual fund investments are subject to market risks read all documents carefully before Investing!
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