Mutual funds: All your goals need a plan, and investment in mutual funds can help you plan your journey toward achieving them. There are different categories of Mutual funds, one of these being focussed funds that invest in a portfolio of stocks not exceeding the count of 30.
On one hand, equity mutual funds attracted ₹8,637 crore in June, data released by the Association of Mutual Funds in India (Amfi) showed, while on the other, the large-cap scheme ( ₹2,049 crore) and focused funds ( ₹1,018 crore) were among the few categories which saw net outflows during June 2023. Debt-oriented schemes witnessed net outflow in the same month after witnessing two consecutive months of net inflows.
What are focussed funds?
Focused funds, which invest in a maximum of 30 stocks. are generally believed to provide small investors the benefits. The primary purpose of focused mutual funds is to allocate their holdings across a restricted number of carefully researched equity and debt funds. The returns from these funds are considered to be more volatile.
“There is no fixed mandate for the kind of market cap the fund manager will look for. Although we have seen that the fund manager builds a portfolio around large cap stocks which hover around 55-75% and balances the majority in mid-cap stocks and a very small portion in small cap,” said Mukesh Kochar.
Why are investors selling focussed funds?
According to Mukesh Kochar, National Head-Wealth, AUM Capital, The focussed funds’ category industry AUM is around 1.08 lakh crore approx. Last month we saw around 1018 cr net redemption in the category which is around 1% of the total size of the category.
“This category has not been able to generate reasonable alpha consistently over the last few years compared to other categories of funds. So funds are moving from a category that has underperformed to other categories which are performing. Although this kind of inflow or outflow is a regular phenomenon and each category of funds has its own pros & cons,” said Mukesh Kochar.
“We feel, the problem with Focused funds is their very construct. Since they hold a concentrated portfolio their performance also gets dependent on those 25-30 companies. While in a bull market, investors can ride with the momentum once the rough patch hits, the performance can take a toll,” said Siddharth Alok – AVP & Investment Councilor, Epsilon Money Mart.
Also, they come with higher risk. Therefore, it is more suitable for seasoned investors. Their performance over the long period is also a mixed bag, added Siddharth.
Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Updated: 19 Jul 2023, 01:54 PM IST