Energy thematic funds performed well in 2024 as global and Indian markets shifted toward sustainable energy. For an investor wanting to profit from the energy sector, funds specialized in energy and natural resources provide a robust combination of prospective growth. Here are some of the best energy thematic funds in 2024.
- DSP Natural Resources and New Energy Fund – Direct Plan-Growth
Category: Sectoral/Thematic
Fund Size: ₹ 1318.19 Cr
Expense Ratio: 0.97%
Launch Date: Jan 03, 2013
Overview:
This thematic fund is making allocations in a distinct and diversified range of sectors (including commodities and mining companies), traditional energy (oil and gas companies), and emerging clean energy (renewable). It also has the flexibility to allocate up to 35% of its assets globally so that the fund can expose you to international opportunities by allocating to international mutual funds or ETFs that are not available in the Indian market.
DSP’s strategy of diversifying investments across energy resources and clean energy innovations has benefitted the fund, particularly in a year in which oil volatility has balanced with renewables growth. By allocating assets to companies engaged with energy storage companies, electric vehicles (EV) infrastructure, and mining of critical raw materials, the fund provides a well-positioned option to take advantage of the energy transition.
Key Highlights:- Focus Areas: Oil, gas, solar, wind, and EV-related infrastructure.
- Notable Holdings:
- Coal India Limited- 8.83%
- Hindalco Industries Limited- 7.97%
- BlackRock Global Funds – World Energy Fund- 7.68%
- Tata Steel Limited- 6.86%
- Oil India Limited- 6.41%
- Performance: 17.5% return over the last 12 months.
- Risk Profile: Moderate to high, with significant long-term growth potential
- ICICI Prudential Energy Opportunities Fund – Direct Plan-Growth
Category: Sectoral/Thematic
Fund Size: ₹ 9791.22 Cr
Expense Ratio: 0.45%
Inception Date- Jul 22, 2024
Overview:
While it’s a new fund, ICICI Prudential Energy Opportunities Fund is unique this year in its focus on traditional energy companies (primarily oil and gas companies) and the rapidly growing (and significant) renewable energy space. Energy security has become one of the three key themes for India’s future. ICICI Prudential has purposefully invested in significant energy producers (and some of the leading companies in the future of clean energy) through this fund.
In particular, allocations made to oil and gas companies and emerging leaders in renewable energy (solar, wind, and battery storage) helped drive performance this year, as India is making aggressive investments to add renewable energy capacity.
Key Highlights:- Focus Areas: Energy, Capital Goods, financial, metal and mining, etc.
- Notable Holdings:
- Reliance Industries-23%
- ONGC- 8.25%
- NTPC- 6.89%
- Power Grid Corporation Of India- 6.78%
- Bharat Petroleum Corporation-5.64%
- Performance: Not applicable since this fund was newly launched in July 2024.
- Risk Profile: High, suitable for investors seeking long-term capital appreciation with energy diversification.
- SBI Energy Opportunities Fund – Direct Plan
Category: Sectoral/Thematic
Fund Size: ₹ 11270.11 Cr
Expense Ratio: 0.55%
Launch Date: Feb 26, 2024
Overview:
In 2024, the SBI Energy Opportunities Fund distinguished itself as an attractive investment opportunity based on India’s aggressive commitment to renewable energy and the global desire to transition to sustainable solutions. The fund invests in companies focused on production, transmission, and distribution and companies providing energy efficiency or energy innovation solutions, specifically in the renewable energy sector.
SBI is well-positioned to benefit from India’s large-scale renewable energy transition to solar and wind energy. The firm has greater exposure to solar energy companies and companies providing electric vehicle support and infrastructure. SBI appears to remain positioned for continued performance as the Indian government continues to seek its aggressive clean energy commitments by 2030, and the third-largest energy market in the world continues to witness a growing commitment to renewable energy in an exploding marketplace of demand for energy that is projected to double by 2050.
The fund aims to provide capital appreciation by investing in traditional and renewable energy companies. The fund invests in companies that help power the world, including companies exploiting oil, gas, and coal energy production and distribution and renewable energy generation/distribution such as solar, wind, hydrogen, and biofuel.
This fund uses a barbell strategy, pairing older-generation industry companies with more innovative new-generation businesses. The investment strategy should smooth out some bumps and provide above-average, risk-adjusted returns without experiencing the roller-coaster ride seen from other heavily traded markets.
Key Highlights:- Focus Areas: Refineries and marketing, power generation, LPG/CNGg/PNG/LNG supplier, etc.
- Notable Holdings:
- Reliance Industries Ltd.- 26.52%
- Bharat Petroleum Corporation Ltd.- 6.75%
- National Thermal Power Corporation Ltd.-6.74%
- Indian Oil Corporation Ltd.- 5.33%
- Performance: Not applicable since this fund was newly launched in July 2024.
- Risk Profile: Moderate, ideal for investors looking for stable, long-term growth.
- Tata Resources & Energy Fund – Direct Plan-Growth
Category: Sectoral/Thematic
Fund Size: ₹ 985.43 Cr
Expense Ratio: 0.61%
Launch Date: 28 Dec 2015
Overview:
This strategy promotes long-term capital growth by investing at least 80% of net assets in equity and equity-related securities. It will also include the Commodities, Energy and Utilities sectors, as defined by macroeconomic classification. The Fund Manager uses the AMFI classification to define its investment universe. He may also allocate capital from time to time to equity and equity-related securities of other companies and to debt and money market instruments to provide some level of diversification at the portfolio level.
The portfolio strategy and subsequent construction is a deliberate balance of growth and value equities. The strategy comprises a blend of secular (non-cyclical) businesses capable of delivering growth under most economic conditions and cyclical equities that typically outperform under certain economic conditions. The primary secular businesses include companies involved in chemicals and agricultural inputs, such as fertilizers and pesticides. The major cyclical identified by the strategy consists of metals, iron & steel and cement companies.
Portfolio construction decisions are made after a careful analysis of the fundamentals, with a focus on quality of management, competitive position and competitive advantage, governance structure, opportunity for growth, and historical performance. This disciplined philosophy is applied to maximize risk-adjusted returns through the market cycle.
Key Highlights:
- Focus Areas: Power generation, refineries & marketing, diversified metals, cement & cement products, etc.
- Notable Holdings:
- National Thermal Power Corporation Ltd.-7.60%
- Reliance Industries Ltd.- 6.40%
- Vedanta Ltd.- 4.33%
- Ultratech Cement Ltd.- 3.56%
- Performance: 38.7% return over the last year.
- Risk Profile: Moderate to high, suitable for investors seeking exposure to both conventional and green energy sectors.
Final Thoughts
Through 2024, energy-themed funds will provide a distinctive opportunity for investors to enrich both traditional and renewable energy sectors. DSP Natural Resources & New Energy Fund and SBI Energy Opportunities Fund have established themselves as market leaders, boasting strong returns spurred by India’s commitment to renewable energy. Similarly, ICICI Prudential Energy Opportunities Fund and Tata Resources & Energy Fund deliver balanced exposure to traditional energy and green technologies for the future.
These funds are a terrific way for long-term investors to recapture the energy sector’s growth as it moves to a more sustainable future. As these funds represent a risk similar to other necessary growth-oriented investments, growth in renewable energy, EV technology, and energy storage will make them a worthy investment opportunity in 2024 and beyond.
