In large cap and multi cap funds, schemes with a value focus shine

Winners held high cash levels when valuations outpaced conviction and moved in when prices fell; Pharma, consumption and IT paid rich returns for some

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Finally, in the large-cap category, low-cost passively-managed schemes focused on value investing have done considerably well.
ET Spotlight
ET Intelligence Group: About eight decades ago, in the aftermath of the Great Depression, Benjamin Graham had advised the ordinary saver to prioritise value in the first seminal work on the science of investing. That meant being out of action when valuations appeared stretched. Top mutual funds seemed to have followed this prescription by the doyen of value investing — and reaped rich rewards through the current rally.

The spotlight is on the winners in pooled asset investing after the benchmark surged three-fourths in eight months to scale the 13,000 peak Tuesday. Through the rally, in the large cap and multi cap categories, schemes of Axis, Mirae, and Parag Parikh Mutual Fund have outshone their peers.

  • 20.45%Annualized Return for 2 year
  • >3 years Suggested Investment Horizon
  • N.ATime taken to double money
  • 11.07%Annualized Return for 3 year
  • >3 years Suggested Investment Horizon
  • 4.11 YearsTime taken to double money
In the large and mid cap category, schemes such as Axis Growth Opportunities and Mirae Asset Emerging Bluechip have been the top performers, beating their category average by 7-8% higher returns.

In the multi-cap category, in the same period, Quant Active Fund, PGIM India Diversified Equity and Parag Parikh Long Term Equity feature in the top three performers, beating the category average returns. They have given 17-22% higher returns than multi-cap category’s average returns.

So, what did they do differently? First, fund managers in these fund houses have been extremely careful about maintaining a proper equation among three key variables: Cash levels of a scheme, investment allocations, and market movements. They maintained high cash levels when valuations outpaced conviction. For instance, a distributor points out that there was a point Axis Mutual Fund had a cash level of close to 10%, almost double of what rivals did. That enabled Axis schemes to jump into the ring when valuations plunged.

Similarly, fund houses such as Mirae stopped lump sum investments in its Emerging Equity scheme. This reduced redemption pressure and capped potential drop in the scheme’s returns.
In Large-Cap and Multi-Cap Funds, Schemes with a Value Focus Shine
Furthermore, the common theme summing up the outperformance of these schemes is their concentrated exposure to stocks. These schemes have invested either in “growth” stocks, which have helped contain the downside, or identified early favourites, such as pharma, consumption and IT.

Finally, in the large-cap category, low-cost passively-managed schemes focused on value investing have done considerably well. A case in point is the Nippon India ETF NV20, a fund focused on 20 companies that are built around the value theme, and ensured higher returns when investments into them surged through the upcycle.
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