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Personal Finance

Horrendous Performance of IDFC Infra Fund

I had featured a “new fund offer’” by IDFC AMC, for it’s IDFC Infra Fund on this blog two years ago and I’m honestly very embarrassed to note its terrible performance over this period. It was the worst performing fund in its category in 2012, and it has done worse than the category average, and indeed, even the CNX Infra Index. From Value Research:

 

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If you look at the bar chart above, you can see that it has underperformed the category on the way up, and done worse on the way down. Overall returns are substandard.

From Moneycontrol:

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The fund hasn’t beaten CNX Infra in any timeframe, expect the 2 year one (where the infra index went down 1% more than this fund)

It is true that infra stocks have taken a beating, but it is also true that this fund, even with a star fund manager like Kenneth Andrade, has grossly underperfomed.

In the post I made, I did take some positions on infra stocks like Elecon Engineering, which have fallen substantially – luckily, I was able to exit with a 15% stop loss (the stock has fallen over 50%).

In the comments, many people mentioned that it’s a great time to buy infra stocks (though I had maintained that the worst was yet to come). It was not a great time to buy infra stocks, apparently. Now may sound like an even better time to get in but here’s my deal: I won’t. I have to wait till prices show strength. Money can be made by betting on bottoms, but there is no “trigger” for these stocks to move up – government spending will need to be controlled, the economy has starting its down move, and infra stocks are hugely overleveraged (so every delay costs them in bank interest). If you’re going to be a vulture, at least wait for them to die.

However, what I have learnt is:

  • Sector funds, even when run by star managers, can be a sheer waste of time and money.
  • Do not review NFOs just because the fund management team did a phone call with you.
  • Ramamurthy says:

    What about Reliance Infrastructure?The fundamentals look good.

  • pranav says:

    I’m totally impressed by your confession. It’s so hard to find people who really confess wrong doing/suggestion.
    In this case it doesn’t matter to me, as I have not taken your guidance , but point here is that person confession of being wrong in front of net…..……..great being honest, regards,
    Pranav mehta

  • Inder says:

    There are others too. Many Sectoral FoFs.
    DSPBR World Mining
    Birla Sun Life Commodity Equities
    DSPBR World Gold
    They all have given negative returns upward of 20% yoY.