Ride the economic wave: Edelweiss launches Business Cycle Fund for India | Personal finance

The Edelweiss Business Cycle Fund approach:

Factor Investing Approach: The fund uses factor investing, creating three distinct baskets of quality, growth, and value stocks. This diversification helps reduce the overall cyclical nature of any single factor.

Focus on dynamics: Within each basket, the fund prioritizes stocks with high dynamics, resulting in a diversified portfolio of 50–60 companies.

Dynamic sector rotation: The fund strategically trades investments across sectors at different points in the business cycle, combining momentum with fundamental analysis to optimize entry and exit points. This approach aims to generate superior alphas (returns that exceed market benchmarks).

Within each basket, the fund selects the highest momentum stocks, resulting in a diversified portfolio of 50-60 stocks. The fund aims to dynamically rotate between sectors over time, seamlessly combining momentum with fundamentals to enter and exit sectors, thereby generating superior alpha.

What is the difference between?

Traditional mutual funds may have a static investment strategy, focusing on a specific sector or size of company. On the other hand, business cycle funds actively adjust their holdings based on the economic climate. This approach aims to offer investors exposure to sectors that are expected to perform well in the current economic phase, potentially leading to better returns.

Ventura Securities explains the different types of business cycles:

Business cycles are the fluctuations in economic activity that an economy experiences over a given period of time. They typically consist of four phases:

1. Expansion: Characterized by increasing economic activity and growth.

2. Peak: The peak of economic growth before the crisis.

3. Contraction: A period of decline in economic activity.

4. Bottom: The lowest point before the economic recovery begins.

Ventura Securities says the Edelweiss Business Cycle Fund will feature dynamic asset allocation.

– Sector Rotation: Adjusting sector exposure based on the prevailing economic cycle. For example, increasing exposure to consumer discretionary and technology during expansions and shifting to defensive sectors like healthcare and media during recessions.

– Stock Selection: Identifying companies with strong fundamentals that are poised to perform well in the current phase of the business cycle.

“The Edelweiss Business Cycle Fund provides investors with a convenient and unique solution by implementing dynamic sector rotations. This strategy effectively addresses the common challenge of timing entry and exit from a sector, which investors often struggle with. Momentum has been the best performing factor in India for many years and when combined with other fundamental factors, it has proven to be highly effective in generating long-term alpha. Investing across sectors and market caps, this fund offers a solid solution for core allocation with a long-term stance,” said Radhika Gupta, Managing Director and CEO, Edelweiss Mutual Fund.

The Fund will be managed by Bharat Lahoti, Co-Head of Factor Investing and Bhavesh Jain, Co-Head of Factor Investing.

Investment strategy: The program will use a bottom-up approach to selecting stocks within each market capitalization and will aim to maintain sector diversification of the portfolio.

Edelweiss Business Cycle Fund: Asset Allocation

– Shares and equity instruments: 80-100%

– Debt and money market instruments: 0-20%

Asset allocation: The fund manager will take into account macroeconomic parameters and consumer sentiment and combine them with an internal, proprietary model, using fundamental and technical stock analysis to create a portfolio that includes sectors, stocks and style appropriate to the business environment.

Who should invest?

• Very high risk investors should invest in the Edelweiss Business Cycle Fund for at least 5 years.
• Risk involved: Very high level of risk.
• Benchmark: Nifty 500 TRI

NFO subscriptions are open from July 9 to July 23. The schemes will reopen for continuous sale and redemption within five business days from the allotment date.

The fund offers systematic investment solutions such as SIP and SWP, which allow you to create a flexible investment plan.

The minimum subscription amount is Rs 5,000 and each subsequent amount can be in multiples of this amount.