Axis Focused 25 Fund
An open-ended equity scheme showing its conviction to hold a highly concentrated portfolio.
|Type ||Open-ended equity scheme ||Benchmark Index ||Primary Benchmark -> S&P CNX Nifty |
Additional Benchmark -> BSE 200
|Min. Investment: |
|For lump sum -> Rs 5,000 and in multiples of Re 1 thereafter |
For Systematic Investment Plan (SIP) -> Rs 1,000 and in multiples of Re 1 thereafter (minimum 36 instalments for the SIP mode)
Rs 100 and in multiples of Re 1 thereafter
|Face Value || |
Rs 10 per unit
|Entry Load ||Nil ||Exit Load * ||1%* |
|Issue Opens ||June 11, 2012 ||Issue Closes ||June 25, 2012 |
* An exit load of 1.0% will be payable if units are redeemed / switched-out within 1 year from the date of allotment.
The investment objective of the scheme is "to generate long term capital appreciation by investing in a concentrated portfolio of equity & equity related instruments of up to 25 companies."
*Source: Scheme Information Document
Is this fund for you?
Axis Focused 25 Fund (AF25) is a diversified equity funds, showing its conviction towards holding a concentrated or "focused" portfolio of upto 25 stocks. Although the fund’s concentrated portfolio strategy is intended towards generating a higher alpha, it could be risky proposition if high conviction doesn’t deliver the required returns.
The fund will pursue a bottom-up approach to stock picking and will aim to reflect the best investment ideas at all times. But nonetheless, the concentrated portfolio strategy would expose AF25 to the following risk:
However in order to reduce the aforementioned risk, AF25 will follow a large cap bias by investing not less than 90% in top-200 companies by market capitalization and will follow a research process.
- Quality risk - Risk of investing in unsuitable companies
- Price risk - Risk of overpaying for a company
- Event risk - An event which has a detrimental impact on companies / sectors invested
- Volatility - Volatility in price due to company or portfolio specific factors
- Liquidity - High impact cost of entry and exit due to host of factors
Portfolio & Investment Strategy
AF25 will follow a blend style of investing, and while focusing on appreciation potential of individual stocks from a fundamental perspective, will benchmark its performance against the S&P CNX Nifty Index (as the primary benchmark).
While discovering stocks for its portfolio it will adopt a bottom-up approach to investing, But being a "focused" diversified equity fund it will hold a concentrated portfolio of not more than 25 stocks, and primarily invest (i.e. not less than 90% of equity portfolio) in companies among top- 200 in terms of market capitalisation - mainly the large cap ones. Also, the fund intends to carefully select the universe of stocks to include:
Thus the investment process works across three parameters:
- Companies having a robust business model; and
- Those enjoying a sustainable competitive advantage (as compared to their competitors)
Also, AF25 intends to review its portfolio continuously while maintaining an investment horizon of 3 to 5 years.
- Identify (through in-depth research) right businesses
- Sustainable business performance (in order to drive stock returns)
- Picking key business cycles
For hedging and portfolio balancing purpose, AF25 may also invest in derivative instruments (in accordance to the guidelines stipulated by SEBI) upto 50% of its net assets, where it could take both long and short positions, depending upon what is deemed fit.
The asset allocation which will be followed by the fund will be as under:
|Instruments ||Indicative Allocation Range |
(% to Total Assets)
|Risk Profile |
|Minimum ||Maximum |
|Equity and equity related instruments (of not exceeding 25 companies) |
Companies among top 200 in terms of market capitalisation -> 90% - 100%
Other equities -> 0% - 10%
|65 ||100 ||High |
|Debt and money market instruments (including securities debt not exceeding 20% of the net assets of the scheme) ||0 ||35 ||Low to Medium |
(Source: Scheme Information Document)
Fund Manager Profile
AF25 will be managed by Mr. Pankaj Murarka (35 years of age), who holds a little over 11 years of experience and has to his credit a Chartered Accountancy degree along with graduation in commerce (B.Com).
Prior to being appointed as the fund manager in Axis Asset Management Company Ltd (in November 2009), he worked as a Principal Officer in Pipal Capital Management Pvt. Ltd. (from April 2009 until November 2009), as a Portfolio Manager with DSP Merrill Lynch Ltd. (from June 2006 until March 2009), Head of Research & Fund Manager at Rare Enterprises (from June 2004 to June 2006), and in equity sales at Motilal Oswal Securities Ltd. (from April 2003 until May 2004).
Along with being designated as fund manager for AF25, Mr. Murarka also co-manages Axis Midcap Fund, Axis Income Saver and Axis Equity Fund.
"Focused" funds have their penchant towards concentrated portfolio holdings. This thus sometime enables to deliver higher alpha, if the stock picking done by the fund manager is correct and also supported by the equity market direction. Hence these funds expose their investors to what is known as the "concentration risk", which is over and above the standard market risk. This thus makes such funds a high risk-high return investment proposition.
At present, since the Indian equity markets are still down by good - 25.7% from the last peak of 21,004.96 points (made on November 5, 2010), it would provide good opportunity to the fund manager of AF25 to do value buying. But given the global economic headwinds, sending shivers, sovereign ratings being axed and economic forecast being tapered, the downside risk to AF25 cannot be ruled out in the immediate ensuing months post its inception. Moreover, since the fund’s stock selection universe is from the large cap domain, its fortune too will also be closely linked to the performance of large caps. Hence, AF25 may not be able to benefit from mid cap rally, whenever it happens.
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