All about investing in value funds and key risks to watch

In this latest episode of 'Mutual Fund Corner', Shweta Rajani, senior vice president and head of mutual funds at Anand Rathi Wealth talks about value funds, the fund’s performance, and whether there is more steam left.

Value funds have generated a return of 7.4 percent in 2022 and so far it has been a good performance. However, according to Anand Rathi Wealth, value funds have not been the best in generating alpha and tend to underperform in a neutral or a bear market.

Rajani said from 2021 onwards, the company has seen a reversal in this behavior. In 2021 and 2022, where the market delivered very good returns and this was mainly contributed by value funds actually doing well. So this rally has been a value-driven rally.

Talking about the risks associated with value funds, Rajani said these funds are cyclical in nature. Secondly, it is highly dependent on the fund manager for correct stock picking. So, the fund manager's capability here plays a very important role, and timing your exit at the right time, because it is cyclical, becomes a third important point.

She added that investors should allocate a maximum of 15-20 percent of the total corpus for the long term.