Aditya Birla Sun Life Focused Equity Fund is a focused fund which invests in a maximum of 30 stocks listed on the Indian stocks exchange. It was launched in 2005 and was previously a large-cap fund which later shifted to focused fund category as the portfolio of the scheme has always been focused on less number of stocks. Although the fund majorly invests in large-cap stocks but has the upper hand over large-cap mutual fund due to 4 main reasons.
1. Focused Portfolio vs Diversified Portfolio
A well-spread portfolio in mutual funds lowers the probability of negative returns and hence reduces the risk. But for a diversified fund to deliver better returns, the majority of the stocks need to perform well. The performance of a few stocks won’t be enough to compensate the returns of all the stocks in the portfolio. Hence the returns of an over-diversified fund might depreciate. On the other hand, the focused portfolio of Aditya Birla Sun Life Focused Equity Fund is concentrated over 29 stocks and all the stocks have been selected after complete analysis of the future aspect and risk. With the good performance of a few stocks, the NAV of the fund can increase significantly hence focused funds can provide better returns than a non-focused fund.
2. Higher Returns
Aditya Birla Sun Life Focused Equity Fund has delivered better returns than the majority of the large-cap stocks due to superior management strategy and focused portfolio. The long term trailing return of the fund has been much better than most of the large-cap funds in India. A large-cap fund generally provides 12-14% annualised returns while Aditya Birla Sun Life Focused Equity Fund has delivered 13-17% annualised returns on an average. The fund has focused corpus allocation in quality stocks which can deliver significant returns in the future.
Due to better stock selection strategy, the fund has been a stable performer compared to the large-cap funds. The negative market conditions have been smartly handled and the losses have been limited above the benchmark and peers. It has done better than most of the large-cap stocks in the negative market conditions. While in the positive trends, Aditya Birla Sun Life Focused Equity Fund has been the better performer and has constantly beaten the peers and index. The fund has maintained stability in every market conditions and has delivered consistent returns to the investors.
4. Low Risk
A focused portfolio is generally considered more volatile as a large amount of corpus is concentrated over less number of stocks. But this is not the case in Aditya Birla Sun Life Focused Equity Fund as the stocks selected by the fund manager possess good fundamentals and are mostly from a large-cap section of the stock market. The standard deviation for the last few years of Aditya Birla Sun Life Focused Equity Fund is lesser than the majority of the large-cap stocks which proves the fund has offered lesser risk than large-cap funds despite having a focused portfolio.
Who Should Invest?
Even though Aditya Birla Sun Life Focused Equity Fund has various advantages over large-cap fund but it is not mandatory that the fund is suitable for every investor. Investors with moderate to low-risk appetite who seek to invest in a focused portfolio of good quality stocks for the long term can invest in this scheme. Those who prefer diversification should invest in a large or multi-cap fund.
Aditya Birla Sun Life Focused Equity Fund is one of the best scheme provided by ABSL Mutual Fund which has been chosen by thousands of investors for long term capital gains. The fund has various advantages over large-cap funds but must be chosen by suitable investors.