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Tiny Outperformers

FMCG funds have done well, but most investors would have adequate exposure to this sector anyway…

At a time when equity funds are struggling to stay in positive territory, the two FMCG funds are proudly displaying one-year returns of 25 per cent and 23 per cent. But going by their really tiny size (together they manage assets less than `200 crore), there aren’t many investors who have benefitted.

Over the past two years these funds have been way ahead of the Sensex as investors and fund managers flocked to such “defensives”. In fact, current valuations of some are definitely stretched. Which means that if you plunge into such funds now, it is not certain that you will earn a lot on your investment. Though there are just two funds in this category, their returns differ substantially (see category returns).

Also, don’t forget that there is a reversion to mean. So, today’s top sector will slide down the ladder to the absolute bottom some time later: plenty of former fans of technology and infrastructure funds will vouch for this. Moreover, you would have exposure to this sector in your regular equity diversified fund (The graph shows FMCG funds’ performance vs an equity-diversified fund). While the FMCG allocation of equity diversified funds stays in the range of 7-10 per cent, FMCG companies hold an exposure of around 13 per cent in the Sensex. n