Focused funds not for rookie investors: experts

When in doubt, stay out: That’s the advice from D-Street experts to potential first-time buyers of focused, or theme-centric, equity mutual funds. To seasoned investors, however, focused funds offer a great opportunity to build wealth, especially in a market where only a tiny section of the broader listed universe is shining.

The Kotak India Focused Equity Fund is the second in this category after Mirae’s May NFO that mopped up ₹900 crore. This open-ended scheme will invest in a focused portfolio of up to 30 stocks across large-cap, mid-cap and small-cap categories, and benchmark itself against the Nifty 200 TRI.

The NFO is currently open and closes on July 9. The fund will be managed by Shibani Kurian and Harish Krishnan and investors can start with a lumpum of ₹5,000 or buy SIP with ₹1,000.


In a polarised market, where just a handful of stocks are climbing, focused equity funds running a concentrated portfolio of 25-30 stocks have been among the best performing funds in the actively managed money management space in recent times. IIFL Focused Equity Fund and Franklin India Focused Equity Fund, the two top performers in the category, have returned 18.33% and 12.73%, respectively, in the past one year against the S&P BSE Sensex return of 11.85%.

“The fund will follow a thematic approach of bottom-up stock picking using the business, management and valuation model. We will evaluate the business environment a company operates in, the capability of the management to execute and scale up the business and valuation of the company based on fundamentals such as discounted cash flows and P/E ratios,” said Shibani Kurian, senior vice-president, Kotak Mutual Fund.

Financial planners believe focused funds are not for first-time investors. “Since they take concentrated bets, returns could be volatile and, hence, are suitable for evolved investors,” said Gajendra Kothari, CEO, Etica Wealth Managers.