The economy through several phases over the course of a few months or years, including expansion, a peak, a contraction, and a collapse. It is useful to comprehend that the economy performs well during boom or expansion periods and poorly during recessions. A business cycle is the movement of the economy through several stages.
A business cycle can be started by changes in interest rates or an increase or decrease in inflation. Many investors find it difficult to estimate when a phase will start or conclude since the length of each phase varies. Business cycle funds can, nevertheless, make money since sector performance varies across the business cycle.
Business cycle funds buy equities in a variety of industries, market capitalizations, and themes. It enables you to seize chances across the market and gradually increase earnings. Additionally, business cycle funds could have some exposure to overseas assets, which might help you take advantage of global possibilities.
Recently, Kotak Mutual Fund launched a new fund offering for its business cycle fund. The plan will invest in equities and industries that exhibit growth during the business cycle. Apart from this, here’s a list of other business cycle funds available in India.
| Name of the fund | 1- year-return(%) |
| ICICI Pru Business Cycle Fund(G) | 13.18 |
| L&T Business Cycles Fund-Reg(G) | 13.06 |
| Tata Business Cycle Fund-Reg(G) | 11.43 |
| Aditya Birla SL Business Cycle Fund-Reg(G) | - |
Note: The above data has been taken from fundsindia
Two of the top funds with returns of more than 13% in a year are the ICICI Pru Business Cycle Fund and the L&T Business Cycles Fund. Following closely behind is the Tata Business Cycle Fund, which has a one-year return of roughly 11%.
There is always a "first mover advantage" in business. Therefore, compared to those who follow the first mover, someone who anticipates others might gain more. Similar to this, finding chances early on is essential when it comes to stock market investment.
The fund manager who comprehends the economy and the market may seize such possibilities based on the lead indications and assist investors in profiting from their investments.
A proper understanding of business cycle stages and portfolio allocation are essential for business cycle funds to perform well. It implies that during a downturn in the economy, these funds have a bigger allocation to large-cap companies.
Additionally, in a growing economy, these funds have more exposure to mid- and small-cap equities. Briefly put, market-savvy investors who have a greater risk tolerance should think about business cycle funds.
