Aditya Birla Sun Life Business Cycle Fund - NFO Details and Review

Aditya Birla Sun Life Business Cycle Fund – NFO Details and Review

Aditya Birla Sun Life Business Cycle Fund - NFO Details and ReviewAditya Birla Sun Life Launches Business Cycle Fund – NFO Details and Review

Aditya Birla Sun Life has launched Business Cycle Fund NFO which would open for subscription on 15th November, 2021. This is an open-ended equity scheme. It focuses on riding business cycle through dynamic allocation between various sectors and stocks at different stages of business cycle in the economy. Should you invest in Aditya Birla Sun Life Business Cycle Fund NFO? What are the various risk factors associated with such funds? Let me provide complete review and analysis about this NFO in this article.

Also Read:  Should you prepay home loan or start a SIP in mutual funds?

What is Business Cycles Investing?

You can skip this section if you are already aware of business cycle theme.

Business cycle has the following phases.

1) Expansion: Strong demand, Capacity utilization above normal, Output growth strong, corporate profitability very strong, Strong tax revenues, Risk aversion very low

2) Recession: Demand growth starts to slow down, Capacity utilization starts to fall, Output growth starts trending lower, tax revenues moderating, risk aversion starts to increase.

3) Slump: Demand growth below normal, Capacity utilization much below normal, Risk aversion very high

4) Recovery: Demand growth starts to pick up, credit growth starts to improve, Tax revenues start to pick up

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 can therefore be a critical determinant of equity market returns and the performance of equity sectors.

Aditya Birla Sun Life Business Cycle Fund – NFO Issue Details

Scheme Opens 15-Nov-21
Scheme Closes 29-Nov-21
Scheme reopens for continuous purchase/sale Within 5 working days
Minimum Lumpsum Rs 500
Minimum SIP Rs 100 for 6 months
NAV of the fund Rs 10 during NFO period
Entry Load Nil
Exit Load 1% if reedeemed within 1 year
Risk Very High Risk
Benchmark S&P BSE 500 TRI
Fund Manager Mr. Vineet Maloo and Mr. Nitesh Jain
Max TER 2.25%

Aditya Birla Sun Life Business Cycle Fund SID

What is the investment objective of this MF scheme?

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.

There is no assurance or guarantee that the investment objective of the scheme will be realized.

What is the allocation pattern in this mutual fund?

This fund investment pattern is as follows:

Type of instruments Min % Max % Risk Profile
Equity & Equity related instruments selected on the basis of business cycle 80% 100% High
Other Equity & Equity related instruments 0% 20% High
Debt and Money Market instruments 0% 20% Low to Medium
Units issued by REITs and InvITs 0% 10% Medium to High

Why to invest in the Aditya Birla Sun Life Business Cycle Fund?

Here are a few reasons to invest in such mutual fund schemes.

1) The mutual fund invests in opportunities that arises during different stages of business Cycle in the Indian economy. These are unique opportunities where such mutual funds can benefit.

2) In the recent past we are seeing the business cycles getting shortened. This can provide numerous opportunities.

Some key risk factors you should consider before you invest in such funds

One should consider some of these risk factors / negative factors before investing.

1) It invests in opportunities arising out of various stages in business cycle. This would limit the capability of the fund to invest in other themes / sectors.

2) It invests based on opportunities arising out of various stages of business cycle that could be high in one period and lower in another period. Though we have seen the shorter business cycles in the recent past, the returns could highly fluctuate.

3) Since this scheme invests in specific opportunities of companies in special situations, concentration risk is extremely high.

4) It invests up to 20% in foreign securities which have geo-political risk and currency risk.

5) It invests in REITs and InvITs which are considered as high risk.

6) It invests some portfolio in debt instruments which have turned to be risky these days.

7) You can refer complete risk factors by going through the scheme related documents.

You may like: How to get regular income through two bucket strategy of investment?

Performance of existing Business Cycle Funds

Currently there are two funds with more than 6 months performance in this segment. Here are the performance details.

L&T Business Cycles Fund: This fund generated 26%, 61%, 21% and 12% annualized returns in the last 6 months, 1 year, 3 years and 5 years respectively.

ICICI Pru Business Cycles Fund: This fund generated 27% returns in the last 6 months and 25% since Jan-2021 (inception).

Aditya Birla Sun Life Business Cycle Fund – Should you avoid this NFO?

Aditya Birla Sun Life Business Cycle Fund invests based on a business cycle’s investment theme. Such opportunities could be high in one period (e.g., post covid-19) and limited number of opportunities in another period. The returns can fluctuate year on year. As indicated in our earlier articles, this is not that exciting theme. High risk investors who still want to test with such themes can invest for at least 5 years’ time frame. Otherwise, one should avoid such schemes.

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Suresh KP

4 thoughts on “Aditya Birla Sun Life Business Cycle Fund – NFO Details and Review”

  1. Hello Suresh Sir,

    Need your suggestion on investment. I have a lumsump amount of 5lakh and want to invest for next 5 or 10 years for the purpose of child education for future.

    Can you please suggest if any mutual fund where i can invest.
    I was planning for Kisan Vikas Patra scheme in post office.

    Thanks,

    1. Hello Rajesh, KVP is low risk option, you can invest. If you would like to invest in mutual funds for 5+ years, I would recommend you can go for hybrid funds like ICICI Equity and Debt fund or HDFC Equity Hybrid fund. If you can invest for 10+ years, you can invest for largecap funds (like Axis Bluechip Fund or Canara Robecco blue chip fund) or low cost Index funds (like UTI Nifty index fund or HDFC Nifty index fund)

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