iStockMutual fund experts believe that given the uncertainty around rates and liquidity, the outlook for banking & PSU fund schemes continues to be positive despite short-term volatility. Banking & PSU funds have offered 3.52% returns in the last one year. Here is a monthly update our list of recommended banking & PSU funds for 2021. There is no change in our list of recommended banking & PSU funds in November.
Another update-LIC MF Banking & PSU Debt Fund lies in 3rd quartile for 8 months. This fund was in the 4th quartile before that and in 3rd quartile prior to it. The scheme has been slipping on the performance chart, but if you have investments in the scheme, you should hold onto them. We will continue to monitor the performance of the fund and update you.
Banking & PSU mutual funds have the mandate to invest at least 80% of their corpus in debt instruments of banks, public sector undertakings, public financial institutions. Because of the investment universe and the government ownership of most of the entities, investment experts consider these schemes as safer investments.
These schemes have the option to invest in private banks, too. However, since banks are tightly regulated and monitored by the Reserve Bank of India and the central government, many investors believe they are relatively safer even in times of crisis.
If you are looking for relatively safer investment options in the debt mutual fund category to invest for three years or more, you may consider investing in these schemes. They may offer you some extra after-tax returns than the traditional bank fixed deposits.
Best banking & PSU funds to invest in 2021
Methodology
ETMutualFunds.com has employed the following parameters for shortlisting the debt mutual fund schemes.
1. Mean rolling returns: Rolled daily for the last three years.
2. Consistency in the last three years: Hurst Exponent, H is used for computing the consistency of a fund. The H exponent is a measure of randomness of NAV series of a fund. Funds with high H tend to exhibit low volatility compared to funds with low H.
i)When H = 0.5, the series of return is said to be a geometric Brownian time series. These type of time series is difficult to forecast.
ii)When H <0.5, the series is said to be mean reverting.
iii)When H>0.5, the series is said to be persistent. The larger the value of H, the stronger is the trend of the series
3. Downside risk: We have considered only the negative returns given by the mutual fund scheme for this measure.
X =Returns below zero
Y = Sum of all squares of X
Z = Y/number of days taken for computing the ratio
Downside risk = Square root of Z
4. Outperformance: Fund Return – Benchmark return. Rolling returns rolled daily is used for computing the return of the fund and the benchmark and subsequently the Active return of the fund.
Asset size: For Debt funds, the threshold asset size is Rs 50 crore
(Disclaimer: past performance is no guarantee for future performance.)
Another update-LIC MF Banking & PSU Debt Fund lies in 3rd quartile for 8 months. This fund was in the 4th quartile before that and in 3rd quartile prior to it. The scheme has been slipping on the performance chart, but if you have investments in the scheme, you should hold onto them. We will continue to monitor the performance of the fund and update you.
Banking & PSU mutual funds have the mandate to invest at least 80% of their corpus in debt instruments of banks, public sector undertakings, public financial institutions. Because of the investment universe and the government ownership of most of the entities, investment experts consider these schemes as safer investments.
These schemes have the option to invest in private banks, too. However, since banks are tightly regulated and monitored by the Reserve Bank of India and the central government, many investors believe they are relatively safer even in times of crisis.
If you are looking for relatively safer investment options in the debt mutual fund category to invest for three years or more, you may consider investing in these schemes. They may offer you some extra after-tax returns than the traditional bank fixed deposits.
Best banking & PSU funds to invest in 2021
- IDFC Banking & PSU Debt Fund
- Axis Banking & PSU Debt Fund
- Aditya Birla Sun Life Banking & PSU Debt Fund
- DSP Banking & PSU Debt Fund
- LIC MF Banking & PSU Debt Fund
Methodology
ETMutualFunds.com has employed the following parameters for shortlisting the debt mutual fund schemes.
1. Mean rolling returns: Rolled daily for the last three years.
2. Consistency in the last three years: Hurst Exponent, H is used for computing the consistency of a fund. The H exponent is a measure of randomness of NAV series of a fund. Funds with high H tend to exhibit low volatility compared to funds with low H.
i)When H = 0.5, the series of return is said to be a geometric Brownian time series. These type of time series is difficult to forecast.
ii)When H <0.5, the series is said to be mean reverting.
iii)When H>0.5, the series is said to be persistent. The larger the value of H, the stronger is the trend of the series
3. Downside risk: We have considered only the negative returns given by the mutual fund scheme for this measure.
X =Returns below zero
Y = Sum of all squares of X
Z = Y/number of days taken for computing the ratio
Downside risk = Square root of Z
4. Outperformance: Fund Return – Benchmark return. Rolling returns rolled daily is used for computing the return of the fund and the benchmark and subsequently the Active return of the fund.
Asset size: For Debt funds, the threshold asset size is Rs 50 crore
(Disclaimer: past performance is no guarantee for future performance.)
( Originally published on Jan 13, 2021 )
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