Mutual Funds

NFO: Kotak Focused Equity - A concentrated multi-cap from Kotak MF

Nalinakanthi V | Updated on July 07, 2019 Published on July 07, 2019

The fund, at any given point, invests in not more than 30 stocks

Thanks to a buoyant stock market, the past few months have seen a slew of new fund launches. While we’ve seen some novel, interesting themes emerge, many of the new issues haven’t been unique. Kotak Mutual Fund’s new offering, Kotak Focused Equity, offers a unique proposition. The fund is open for subscription till July 9.

Being a multi-cap fund, Kotak Focused Equity will have the flexibility to juggle allocation across small-, mid- and large-cap stocks. The scheme will have a concentrated portfolio. At any given point, it will invest in not more than 30 stocks. In contrast, Kotak Standard Multicap currently holds around 55 stocks in its portfolio.

While a concentrated portfolio shows higher conviction and will pay off if the key bets play out well, the flip side is that in the event of a steep correction in the price of the top holdings, the downside risk to the fund’s performance can be significant.

Fund themes

The scheme has identified five broad themes to start with. One is stocks in the financial services space. Two, the fund is hoping to ride on the capex recovery cycle and investment into capacity creation, which will have a positive rub-off on sectors such as capital goods, auto ancillaries, construction and related sectors such as cement, chemicals and industrials. Higher consumer spend with an increase in disposable income should benefit consumption themes such as FMCG and retail, which the fund is seeking to capitalise on. Two other themes that find a place in Kotak Focused Equity’s investment mandate are clean, renewable energy and export beneficiaries such as IT and pharma.

The fund’s performance will be benchmarked to the Nifty 200 TRI Index. Being an open-ended fund, investors have the option of subscribing to the scheme even after the NFO period. If you wish to redeem your investment within a year from the date of investment, you will have to part with 1 per cent of the corpus as exit load.

Category performance

The market is aflush with focussed funds that are betting on a concentrated portfolio strategy. Several large- and mid-cap schemes with a mandate of running a concentrated portfolio were renamed as Focussed Equity schemes last year. They include SBI Focused Equity, Franklin India Focused Equity, Axis Focused 25, ICICI Prudential Focussed Equity, IDFC Focused Equity and L&T Focused Equity. While most of these schemes are multi-cap ones with the flexibility to switch allocation across market-cap curves, there are some large-cap funds, too. For instance, Sundaram Select Focus, IDBI Focused 30 Equity and Motilal Oswal Focused 25 invest almost a third of their assets in large-cap stocks.

Multi-cap-oriented focussed equity schemes have, on an average, delivered 8 per cent gains over the past year. Over three- and five-year periods, they have managed to deliver average returns of 13.3 per cent and 12.8 per cent, respectively. Those that bet on large-cap stocks, with an exception of Motilal Oswal Focused 25 and Sundaram Select Focus, have delivered tad lower than their multi-cap peers.

The writer is an independent financial consultant

Published on July 07, 2019

A letter from the Editor

Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.