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PSU Equity Funds – Definition, Best Funds & Should You Invest in Them

Highlights

  • PSU Equity Funds that invest in stocks of government-owned companies have performed poorly for quite some time. Shall you invest in them?
  • NO! In case you want to invest in PSU stocks, choose a multi-cap fund that put some money in the same

There is a category of mutual funds that invest in specific themes. These funds are known as thematic funds. PSU Equity Funds are a kind of thematic funds, let us understand these better.

What is a PSU Equity Mutual Fund?

As the name suggests, these are funds that invest in stocks of public sector units (PSU) listed on the stock exchange. PSU Equity mutual funds are open-ended equity funds and invest in government-owned companies.

Top Mutual Funds to Invest in Now

Historically, most of the large businesses in various sectors in India were run by the government. It was only post liberalization in 1991 that private sector companies were allowed to start a business in many sectors. These sectors include banking, oil & gas, telecom, metals, hospitality, aviation, etc. Let us look at the best PSU equity funds.

Best Performing PSU Equity Funds

Invesco India PSU Equity Fund

This fund is offered by Invesco Mutual Fund. These are the key points to note:

  • This fund was launched on 18th Nov 2009 and has delivered an annualized return of 5.68% since launch.
  • The benchmark of this fund is S&P BSE PSU Index.
  • The current AUM is 119 crores.
  • The portfolio comprises 19 stocks with 38% in large-caps and 62% in mid and small-caps.
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SBI PSU Fund

This fund is offered by SBI Mutual Fund. These are the key points to note:

  • This fund was launched on 7th July 2010 and has delivered an annualized return of -1.80 % since launch.
  • The benchmark of this fund is S&P BSE PSU Index.
  • The current AUM is 144crores.
  • The portfolio comprises 21 stocks with 58% in large caps and 42% in mid and small caps.

Returns of PSU Equity Funds

The table below shows the returns delivered by these funds in % terms in a regular plan.

Fund NameLast 3 YearsLast 5 YearsLast 7 Years
Invesco PSU-0.315.479.94
SBI PSU-9.84-2.291.64

Should You Invest in PSU Equity Mutual Funds?

As we can see from the above table, PSU equity funds have performed very poorly for the last many years. This is because most of the PSU companies are not as efficient as private companies. Over the years, private companies have eaten into the market share of PSU companies in many sectors and have grown at the expense of these government-owned companies. Also, many PSU companies are burdened with bureaucracy and inefficient management

We recommend avoiding investment in PSU equity funds since performance has been lacklustre and growth prospects are not bright. You should invest a major part of your equity portfolio in multi-cap funds that are more diversified. To know about the best multi-cap equity funds, you can read another post of ours- https://www.wishfin.com/mutual-fund/five-best-performing-multi-cap-funds-to-invest-in/

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