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Past 1-Year Returns From Focused Equity Funds Are Up To 95%? Should You Invest?
Focused equity funds as the name suggest are a type of equity funds with their portfolio being focused or concentrated. As per the SEBI guidelines, such mutual funds cannot have over 30 stocks in their portfolio and so the number of stock holding ranges between 20 and 25. And the 30 scrips specified can be from large, mid or small cap. And so with such a high number of stock holdings that can be from different sectors and from across market caps, volatility also remains high in these funds.
Remember for an equity mutual fund, the number of stocks in the portfolio could go as high as 100 stocks. So, with focused equity funds, fund managers put their bet on select few stocks.
1-Year Returns from Focused mutual funds have been encouraging
In the past 1-year after the stock markets have gained substantially to record high, focused mutual funds with investments into varied stocks have also yielded returns to the tune of 75-100%. In comparison during the same period, Sensex has surged by 67% (taking into consideration Sensex opening levels as on March 30, 20200.
5 Top performing Focused funds in the last one year
1. Nippon India Focused Equity Fund: 1-year annualized return from the fund has been 96.73%. Fund size is substantial of Rs.4990 crore. And of the total 90.52% corpus into Indian stocks, 55.67% is into large cap stocks, 11.76% is in mid cap stocks, 8.95% in small cap stocks.
| Focused fund | 1-year return | 3-year return | 5-year return |
|---|---|---|---|
| Nippon India Focused Equity Fund | 96.73% | 11.65% | 15.88% |
2. Mirae Asset Focused Fund-Regular Plan:
With a fund size of Rs. 5179 crore and expense ratio of 1.94%, Mirae Asset Focused Fund has provided 1-year annualized return of 82.34%. NAV of the fund as on March 26, 2021 was 15.528. This fund has 98% invested into Indian stocks with 46% in large-cap stocks and the remaining 25% and 11% in mid-cap and small cap stocks, respectively.
| Focused fund | 1-year return | 3-year return | 5-year return |
|---|---|---|---|
| Mirae Asset Focused Fund-Regular Plan | 82.34% | NA | NA |
3. Franklin India Focused Equity Fund:
Fund size of this Franklin AMC is Rs. 8028 crore and it holds CRISIL 2-star rating. 93% of the entire corpus is into stocks with 67% in large-cap, 9% in mid-cap and 12% into small cap.
| Focused fund | 1-year return | 3-year return | 5-year return |
|---|---|---|---|
| Franklin India Focused Equity Fund | 80.34% | 11.27% | 13.64% |
4.ICICI Prudential Focused Equity Fund:
This is a 3-star CRISIL rated fund with 95% investment in Indian stocks of which 75.87% is in large cap stocks, 8.88% is in mid cap stocks, 6.81% in small cap stocks.
| Focused fund | 1-year return | 3-year return | 5-year return |
|---|---|---|---|
| ICICI Prudential Focused Equity Fund | 77.48% | 12.82% | 14.00% |
5. IIFL Focused Equity Fund-Regular Plan:
This fund from IIFL Mutual fund is a 5-star rated CRISIL fund and out of the total 98% investment into stocks, over 60% is into large-caps.
| Focused fund | 1-year return | 3-year return | 5-year return |
|---|---|---|---|
| IIFL Focused Equity Fund-Regular Plan | 73.54% | 19.56% | 18.25% |
So, with majority of the corpus put into large caps, the focused fund helps to provide higher alpha driven by mid and small cap stocks, while the downside risk in the fund is protected with the help of large-cap holdings.
Note the return for the different funds are taken from moneycontrol website as on March 29,2021
Should You Invest In Focused Equity Mutual Funds?
In the past one year, the returns in the equity fund space has been propelled by substantial gains in equity from the lows induced by Covid 19 and in the long term, these focused funds or a focused approach in the portfolio may or may not work in all market conditions. So, a better suggestion as per experts is to look at diversified equity funds that have managed to deliver across market cycles.
Further as suggested by the different focused funds, the risk in them is moderately high, higher than even diversified funds, so for you to be investing in focused equity funds, you should have a significantly higher risk appetite, as any wrong bet could yield significant losses for you.
