The poor run of infrastructure funds seems to be on for the fourth consecutive fiscal with schemes in the infrastructure universe losing sizeable assets in the first quarter of FY14. Assets of the infra funds are now at their lowest in six years.
For the three months to June 30,total assets of infra funds have shrunk R1,172 crore to R7,724 crore. In FY13,FY12 and FY11,these funds lost assets worth R 2,105 crore,R4,156 crore and R4,745 crore,respectively. In sum,the total assets under management (AUM) of infra funds has more than halved in a little more than 3 years declining a whopping 61% or R12,181 crore from a high of R19,905 crore at the end of FY10. The investment cycle has not picked up in the last few years,which has impacted the performance of these funds, said Dhruva Chatterji,senior investment consultant,Morningstar India.
There has been a policy paralysis at the government’s end with regard to the infra projects and several projects have come unstuck in the past 2-3 years, added Sadanand Shetty,VP & senior fund manager – equity,Taurus MF.
Its mostly the larger fund houses,which had garnered substantial infra assets during FY08 and FY10,that have taken a beating. ICICI Prudential Infrastructure Reg has seen the maximum asset erosion of R2,597 crore in the period between March 31,2010 and June 30,2012. DSPBR TIGER Reg,Reliance Infrastructure,Tata Infrastructure Plan A and SBI Infrastructure are among the other top losers. In percentage terms,16 funds have seen an asset erosion of more than 60% in the period,with Reliance Infrastructures assets depleting the most at 79%.
Infra funds are among the worst performing categories in the last one year,with average category returns of -9.34%. Twenty-two out of a universe of 23 infra schemes have given negative returns in the last one year. The only fund to give positive 1-year returns is Franklin Build India (9.57%). Reliance Infrastructure and Escorts Infrastructure are the worst performers for both the 1-year and 3-year periods with negative returns of anywhere between 23% and 28%.
Infra funds typically invest in sectors such as infrastructure,capital goods,engineering and to some extent energy and utilities. However,in the past year or so,fund managers have tried to diversify their portfolio further,increasing their exposure to banking scrips in particular. The banking stocks were the saving grace for infra funds last year. However,banking stocks have underperformed in the first six months of 2013,further dragging the returns of infra funds, said Chatterji. The BSE Bankex has slid 9.11% in the year to date.
The countrys infrastructure projects have been hit by several headwinds. For example,power projects have suffered because of issues related to coal linkage,while road projects have slowed due to issues related to land acquisition.
Experts reckon tough times will continue for infra funds. Recent announcements from the government to revive growth in the space have failed to boost shares of infra and power companies owing to the uncertainty surrounding the implementation of these proposals. The performance of infra funds will improve only if the investment cycle picks up, said Chatterji.