I invested in Kotak Indo World Infrastructure Fund in January 2008. The value of my investment in the fund has eroded by more than 20 per cent. Should I redeem the amount now?
- Thirunarayanan
Kotak Indo World Infrastructure was launched in December 2007 as a closed-end fund. The fund's objective is to invest up to 90 per cent of its assets in equities of domestic as well as global infrastructure companies.
When you had invested in this fund, equity markets were at their peak and so was the infrastructure theme. This attracted many investors like you to invest in a fund such as this. Following its launch, the fund faced the downturn and the underlying infrastructure theme also went out of favour, which is why the fund failed to put up good performance numbers.
Ideally, thematic funds should not occupy a core position in any equity portfolio as they are more volatile than pure diversified equity funds because of their narrow investment objective. These funds do well only when their underlying theme is the flavour of the season. Limit such holdings to around 15-20 per cent of your portfolio.
Moreover, by investing in a closed-end fund you had incurred a high initial expense that was charged to the fund. In future avoid closed-end funds as they allow investment only during the NFO period when the fund has no track record. Our advice is that you invest regularly via Systematic Investment Plan (SIPs) in large-cap diversified funds that have a good track record.
If you wish to take an exposure to the infrastructure theme, consider better-performing funds with a longer track record such as ICICI Prudential Infrastructure, Tata Infrastructure or UTI Infrastructure.
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This article was originally published on May 27, 2010.
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