LIC MF Infra Fund Shows Impressive Gains: Should You Consider Investing?

October 25, 2024 By: Shalini Bhardwaj

With India’s growing focus on infrastructure, funds investing in this sector have surged, and LIC Mutual Fund’s Infrastructure Fund is one of them. This fund has generated excellent returns, doubling wealth in 3 years and nearly tripling it in 5 years. But does it fit your investment goals? Here’s a look at the fund’s performance, features, and risks to help you decide if it’s the right investment for you.

Understanding LIC MF Infrastructure Fund

LIC MF Infrastructure Fund is an open-ended equity fund that primarily invests in companies within the infrastructure sector. Its objective is to promote long-term capital appreciation by investing in sectors that support India’s infrastructural growth, such as construction, energy, transportation, and more. The fund offers an opportunity to tap into India’s rapid development while potentially benefiting from long-term growth.

Strong Returns on Lump Sum Investments

The LIC MF Infrastructure Fund has posted impressive numbers in recent years. Here’s how it has performed on a lump-sum investment basis:

• 1-Year Return: 73.48%
• 3-Year Return (CAGR): 34.47%
• 5-Year Return (CAGR): 29.58%
• Since Inception: 10.50% CAGR over 16 years

For a Rs 1 lakh investment, this fund has produced significant growth:

• 1-Year Value: Rs 1.73 lakh
• 3-Year Value: Rs 2.4 lakh (2.4 times growth)
• 5-Year Value: Rs 3.6 lakh (3.6 times growth)
• Since Inception: Rs 5.2 lakh over 16 years

This performance highlights the fund’s strong returns, especially over the last five years, due to India’s infrastructure sector expansion. However, past performance doesn’t guarantee future returns, so assess your investment horizon and risk tolerance.

SIP Performance of LIC MF Infrastructure Fund

For investors who prefer Systematic Investment Plans (SIPs), LIC MF Infrastructure Fund has delivered equally impressive returns. Here’s how a SIP of Rs 10,000 per month has grown over the years:

• 3-Year Investment (Total Rs 3.6 lakh): Valued at Rs 6.9 lakh (Annualized Return of 47.26%)
• 5-Year Investment (Total Rs 6 lakh): Valued at Rs 15.57 lakh (Annualized Return of 39.30%)

This SIP growth highlights the potential gains when investing gradually over time, making it an attractive option for investors looking for regular contributions and potentially high returns.

Where LIC MF Infrastructure Fund Invests

The fund has allocated 97.44% of its assets to equities, targeting large, mid, and small-cap companies in the infrastructure space:

• Large Cap: 19.3%
• Mid Cap: 23.09%
• Small Cap: 55.05%

Since small-cap stocks dominate its portfolio, this fund is considered high-risk. Small caps can deliver strong returns, but they are also subject to market volatility. This heavy allocation to small caps contributes to the fund’s potential for high returns but also makes it more volatile.

Key Details to Know Before Investing

Here are some important aspects of LIC MF Infrastructure Fund that can impact your decision:

• Fund Managers: Yogesh Patil and Mahesh Bendre manage this fund, bringing 22+ years and 12+ years of experience, respectively.
• Expense Ratio: The fund’s expense ratio is 2.40% for the regular plan and 1.38% for the direct plan, higher than average due to its active management in the equity-heavy infrastructure sector.
• Exit Load: Redemption within 90 days incurs an exit load:
  • 0-12% of units redeemed within 90 days: No exit load
  • Above 12% within 90 days: 1% exit load
  • No exit load after 90 days

Minimum Investment Requirement

For investors looking to get started, LIC MF Infrastructure Fund offers flexibility:

• Lump Sum: Minimum investment is Rs 5,000.
• SIP: Starts from as low as Rs 200 per month, making it accessible for small investors.

Who Should Consider Investing?

This fund’s strong returns are tied to India’s infrastructure growth, which may appeal to investors seeking long-term capital appreciation. Given the high risk associated with heavy equity exposure in small caps, LIC MF Infrastructure Fund is suitable for those with a higher risk tolerance and a long investment horizon. The fund’s high expense ratio and volatility mean it’s better suited for experienced investors who can handle fluctuations in the short term.

Things to Consider

While the fund’s past performance is impressive, market conditions and sector-specific growth heavily influence future returns. India’s infrastructure sector is set for expansion, but the economic environment can change, impacting performance. Before investing, ensure the fund aligns with your financial goals and risk profile.