High Return Thematic Mutual Funds in the Last 5 Years 

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I'm Mitali Dhoke (Sr. Research Analyst), here to simplify mutual fund investing and guide you on a smarter wealth creation journey!

When we talk about high-return mutual funds, most people instantly think of smallcap or midcap funds.But what if I told you... there's another category that's been quietly outperforming and turning heads?

The thematic fund category has delivered remarkable returns. Out of the 32 schemes in the category, 20 schemes have registered a CAGR of over 20% on a rolling 5-year return basis.

In this video, we're diving into 5 high-return thematic mutual funds that have delivered stellar performance in the last 5 years - and you might just be missing out on them.

Thematic Funds are equity mutual funds that invest in stocks belonging to a specific theme such as consumption, public sector undertakings (PSU), manufacturing, and environmental, social, and governance (ESG), and overseas, etc.

They are mandated to invest at least 80% of their assets in stocks of companies within the chosen theme.

For instance, a consumption-themed mutual fund will invest predominantly in companies engaged in producing goods and services for direct consumption such as Titan, ITC, Trent, Nestle India, Jubilant FoodWorks, etc.

Let's have a look at the 5 high-return thematic mutual funds selected based on 5-year rolling returns.

#1 ICICI Pru Commodities Fund

ICICI Pru Commodities Fund invests predominantly in companies engaged in commodity and related sectors.

It uses a blend of growth and value style of investing to select stocks for the portfolio.

The fund was launched in October 2019 and currently has an asset under management (AUM) of Rs 26.2 billion (bn).

On a rolling 5-year returns, the fund has delivered a CAGR of 35.2%.

The fund's top stock exposure includes Jindal Steel & Power (9%), JSW Steel (8.2%), and Ambuja Cements (7.6%).

Sector-wise, the fund's portfolio is dominated by iron & steel (32.2%), chemicals (28.2%), and construction materials (20.3%).

#2 Aditya Birla SL PSU Equity Fund

Aditya Birla SL PSU Equity Fund aims to benefit from the growth potential of PSUs. These companies are considered relatively safe as they are backed by the government.

The fund was launched in December 2019 and currently has an AUM of Rs 53.9 bn.

It follows the bottom-up approach to pick stocks which takes into account the fundamentals such as growth potential, stability, valuations, return metrics, financial strength, etc.

In the last 5 years, the fund has delivered a CAGR of 31.1% on a rolling basis.

The fund's top picks are SBI (13%), NTPC (8.7%), and Power Grid Corporation of India (8.2%).

In terms of sectors, the fund has shown a preference for banks (21.4%), power (17.7%), and crude oil (15.2%).

#3 Invesco India PSU Equity Fund

Invesco India PSU Equity Fund invests in companies where the central/state government has majority shareholding or management control or has the power to appoint a majority of directors.

The fund was incepted in November 2009 and has an AUM of Rs 12.8 bn.

It follows the bottom-up approach to pick PSU stocks with a keen focus on funds with high growth potential and return on equity (ROE).

The fund's 5-year rolling return is at 30.3%.

Invesco India PSU Equity Fund's top holdings comprise Power Grid Corporation of India (8.6%), Bharat Electronics (8.5%), and SBI (8.4%).

Its top sectors are engineering (24.5%), power (23.2%), and crude oil (16.4%).

#4 ICICI Pru India Opp Fund

ICICI Pru India Opp Fund aims to invest in opportunities presented by special situations such as corporate restructuring, government policy and/or regulatory changes, companies going through temporary unique challenges and other similar instances.

The fund follows a blend of value and growth style of investing and uses a bottom-up approach to stock-picking.

It was launched in January 2019 and currently has an AUM of Rs 271.9 bn.

In the last 5 years, the fund has generated returns of 30.1% on a rolling basis.

Popular large-cap names such as Axis Bank (7.1%), HDFC Bank (5.7%), and Reliance Industries (4.9%) currently form the fund's top holdings.

Among sectors, the fund has a higher allocation in banks (23.2%), healthcare (10.4%), and insurance (9.7%).

#5 Franklin India Opportunities Fund

Franklin India Opportunities Fund invests primarily in companies poised to benefit from initiatives such as Make in India, sustainable living, and digitalisation.

The fund follows a blend of value and growth style of investing. It takes defensive or aggressive positions depending on the opportunities available at various points in time.

The fund was launched in February 2000 and currently has an AUM of Rs 64.9 bn.

On a rolling 5-year returns, the fund has delivered returns of 29.8%.

Its top stock holdings are Reliance Industries (6.6%), HDFC Bank (6.1%), and Hindustan Unilever (4.1%).

Sector-wise, the fund's portfolio is primarily invested in infotech (13.3%), banks (12.2%), and healthcare (10%).

Conclusion

Thematic funds may generate high returns if the underlying theme performs well over a period.

However, not every theme can outperform year after year.

Performance across themes may differ depending on factors such as government policies, demand conditions, input prices, etc.

Since the investment universe of thematic funds is limited, these funds may witness high downside risk during uncertain market conditions.

Thus, thematic funds are high-risk - high return investments. They may be suitable only for aggressive investors who understand the risks involved and have a long-term investment horizon of at least 5-7 years.

If you are an aggressive investor, consider restricting the overall allocation in thematic funds to under 15% of the entire equity portfolio.

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Disclaimer: Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Registration granted by SEBI, Membership of BASL and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. Investment in securities market are subject to market risks. Read all the related documents carefully before investing.