NFO review: Kotak Business Cycle Fund

Name of the new fund that's launching?
Kotak Business Cycle Fund. Kotak Mutual Fund will launch this.

It is an open-end equity scheme, meaning you can conveniently buy and sell this fund on a daily basis.

When is it open for public subscription?
September 7, 2022 - September 21, 2022.

Who will be managing this fund?
There are two fund managers: Pankaj Tibrewal and Abhishek Bisen.

The fund will primarily be managed by Tibrewal, while Bisen will oversee the debt component.

We understand fund managers play a very important role in the success of a fund, which is why we'll look at them in detail a little later in this piece.

What will be the benchmark for this fund?
Nifty 500 Total Return Index.

What will be this fund's investment philosophy?
They will follow the 'business cycle' theme.

Sounds vague. Can you explain what it means?
Basically, this fund will identify business cycles based on local and macro factors before they can zero in on companies that can benefit from it.

Are there other funds that have a similar philosophy?
The 'business cycle' theme has been in the limelight in the last 12 months or so.

In fact, Kotak's latest offering will be the sixth such fund, joining the likes of Aditya Birla Sun Life, Baroda BNP Paribas, Tata Mutual Fund, ICICI Prudential and L&T.

Show me the money. How well have these 'business cycle' funds performed?
L&T Business Cycles Fund is one of the oldest funds in the category. It has delivered 11.99 per cent returns in the last seven years. In comparison, S&P BSE 500 TRI generated returns of 15.05 per cent.

This fund has also underperformed in the five- and three-year periods against S&P BSE 500 TRI.

But it's not all negative. In the last one year - when the Indian economy started to look strong and there was a broad-based rally in the market - the fund has managed to outperform the S&P BSE 500 TRI by a wide margin.

Even the other 'business cycle' funds have started outperforming the market in the last one year.

It's a pretty mixed performance. Can you explain why?
Business cycle funds are very cyclical in nature as they bet on companies that will grow when the economy is going up and there is overall euphoria in the market. But when the economy witnesses a slowdown, such themes fail to deliver satisfactory results.

What kind of stocks are these 'business cycle' funds holding at the moment?
Currently, they are more tilted towards financials, capital goods and consumer staples.

Like any flexi-cap funds, they are investing across broad markets, meaning they are investing in companies regardless of how big or small they are.

However, these funds currently have large holdings in large-cap stocks.

Fund managers are super important. So, here's more about them (and their track record).
Let's start with Pankaj Tibrewal.

He has been with the fund house for 12 years, and has an overall experience of over 19 years in the industry. Prior to joining Kotak AMC, he was in the fund management team of Principal PNB Asset Management Private Ltd.

Tibrewal did his Master's in Finance from Manchester University (UK).

Currently, he manages three funds for Kotak and their track record is detailed below.

Abhishek Bisen, meanwhile, manages 12 funds at Kotak. He has been associated with the company since October 2006 and his key responsibilities include fund management of debt schemes.

Prior to joining Kotak AMC, Abhishek was working with Securities Trading Corporation of India Limited, where he was looking at Sales & Trading of Fixed Income Products alongside doing portfolio advisory.

His educational background is BA (Management) and MBA (Finance).

What about Kotak Mutual Fund?

They are a seasoned mutual fund house. Launched in December 1998, they now have approximately 43.8 lakh investor folios in various schemes (as of June 30, 2022). The total worth of their investments is Rs 2.76 lakh crore.