Here’s the list of the best focused mutual funds to invest in 2019 –
- SBI Focused Equity Fund
- Franklin India Focused Equity Fund
- Aditya Birla SL Focused Equity Fund
Here are the parameter scores of the above funds according to Finpeg CRAFT Framework…
To understand the parameters in detail, please refer to Finpeg CRAFT Framework
You can refer to the following pointers to understand what each of these parameters mean in short…
- Long-term Percentile Rank
This is average percentile rank of the fund since Jan 2004 based on 3-year return. This is a measure of a fund’s performance with respect to its peers. Lower the rank, better the performance.
- Top25 Percentage
This is the percentage to capture the number of times the fund was in top 25% since Jan 2004. This is a measure of consistency of performance of a fund. Higher the percentage, better the consistency.
- Downside Deviation
A variant of standard deviation. It only captures deviation below the average return. This captures the risk associated with the fund. Lower the deviation, lower is the risk.
- Near-term Percentile Rank
Average percentile rank of the fund in last 1 year based on 1-year return. This is a measure of a fund’s recent performance with respect to its peers. Lower the rank, better the performance.
- Average Return in 2008-09
Average 1-year return delivered by the fund during the crash of 2008-09. This captures the performance of the fund during times of stress.
Why SBI Focused Equity Fund is the Best Multicap Mutual Fund in 2019
After carefully weighing in all the parameter scores, SBI Focused Equity Fund comes out as the best multicap fund in 2019.
This is because of the consistent performance indicated by the most appearances (31% times) in the top 25 percentile of the category. This, when coupled with a very low downside deviation (4.2%) makes this the best of the three funds on the list and other focused mutual funds.
To add to these two numbers, the near-term performance of the fund has been stupendous. And finally, what increases our confidence in this fund is the manageable AUM size which is less than half than the next fund on the list – Franklin India Focused Equity Fund.
What are Focused Mutual Funds
As mentioned in our Best Multicap Funds to Invest in 2019, multicap category has been split in to three now – multi cap mutual funds, focused mutual funds, value/contra mutual funds – according to the SEBI’s re-categorization which came in to force last year.
Focused and value mutual funds can be viewed as a sub-category of multicap mutual funds. This is because they are not bound by market capitalization while selecting which stocks to invest in.
It’s just that different philosophies guide these fund categories.
Focused mutual funds investors believe that investing in a small portfolio of companies (25-30) instead of a very diversified portfolio (50-75) will be more rewarding.
Value mutual funds try to follow the philosophy of value investing popularized by Mr. Warren Buffet.
The gist of value investing is discovering stocks that have their market price substantially lower than their intrinsic value. And once enough people find out about the stock and start buying it, due to the mechanics of demand and supply, the price of the stock rises. You are rewarded for discovering the stock’s value before most others.
Focused mutual funds may or may not state the market capitalization they intend to focus on.
Who Should Invest in Focused Mutual Funds
This is slightly tricky to answer. There is no specific risk profile or requirement of an investor that warrants investments in focused mutual funds per se.
However, since you can view this as a sub-category of multicap mutual funds, you can invest in focused funds if you find a focused fund that is at par with the best multicap mutual funds.
Also, an investor can invest in in focused mutual funds if one believes that investing in a portfolio consisting of smaller number of companies will boost returns.
What are the expected returns of Focused Mutual Funds
Since most focused funds today are multi cap mutual funds of the yesteryear, there is bound to be a great similarity in the risk-return profile of the best multicap funds and the best focused funds.
For the best focused mutual funds according to Finpeg, the following are the 3-year and 5-year rolling return and standard deviation.
Note – NAV considered is of regular and growth options of the funds and for the period 1st Jan 2010 to 31st Dec 2018
To know what are the best mutual funds in other categories like large cap, visit this page.