The Outside View

Housing Opportunities Funds On Offer Soon. Should You Invest?

17 June 2017

Mutual fund houses want to grow their AUM (Assets Under Management). And, that's fair considering they work for profit. However, what's unfair is perhaps the way they try to grow their business.

There's a phrase that best describes the mindset of many mutual fund houses - "Make hay while the sun shines." Do you think these are harsh words?

Consider this...

Some mutual funds are trying to come up with thematic schemes focusing on the Government's ambitious programme "Housing for All by 2022". So, please don't be surprised to see mutual fund houses floating "Housing Opportunities Funds" in the upcoming months. Now, what's going to be so special about them?

Do fund houses mean, diversified opportunities funds won't be good enough to capture the growth prospects of the housing sector and allied industries? The "Housing Opportunities Funds" are likely to invest 70% of their assets in equity and equity-related securities, and the rest 30% would be deployed into REITs (Real Estate Investment Trusts), InVTs (Infrastructure Investment Trusts), and debt instruments issued by real estate companies.

Now it would be a miscalculation to assume that, only listed companies are going to be the biggest beneficiaries of the Government's ambitious housing programme. And for mutual funds investing in unlisted companies may not be easy considering regulatory constraints. Currently, only a handful of listed real estate companies have high exposure to affordable housing projects. Even after considering the potential opportunities that may unlock over the next few years, the financial position of many companies is extremely weak and the net positives on their performance are expected to be limited.

As remains the question of investing in allied sectors such as cement, ceramics, and housing finance companies; they already form a part of the portfolio of many opportunities funds. Points above are good enough to believe that, mutual funds are trying to sell old wine in a new bottle. Do you recollect them launching infrastructure funds one after another between 2005 and 2007? We know what happened to them later on. Infrastructure funds turned out to be damp squibs. Are housing opportunities funds are turning out to be "new infrastructure funds? Well, only time can tell.

What's certain is, investors don't need more products. They need the right guidance. To become a successful investor, you need not invest in tens of schemes, but by staying invested with a few equity diversified funds that have proven their mettle exhibiting a respectable performance record across time frames and market phases.

If you need superlative guidance to invest in the best mutual fund schemes, opt for PersonalFN's unbiased and independent research service, FundSelect. We will share with you the 6 Ultimate Secrets to Beating the Market by a Whopping 70%! We strongly recommend you opt in to know which equity mutual fund you should buy, hold and sell.

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader.

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