360 ONE Focused Equity Fund: Outscoring with its High Conviction Bets

360 ONE Focused Equity Fund is a Focused Fund that has established itself as a category outperformer. Its remarkable performance has rewarded investors effectively by balancing the risk taken with substantial returns.

The erstwhile IIFL Focused Equity Fund was recently renamed as 360 ONE Focused Equity Fund following the rebranding of IIFL Mutual Fund to 360 ONE Mutual Fund. The fund aims to generate long-term capital appreciation by investing in a concentrated portfolio of a maximum of 30 high-conviction stock ideas.

The fund follows a multi-cap approach to invest across market cap segments but with a large-cap bias. 360 ONE Focused Equity Fund adopts a business cycle investment approach to determine sectors based on their potential to outperform or underperform. It accordingly takes concentrated exposure in stocks of sectors that are expected to perform well. The fund aims to identify strong growth companies offering favourable risk-reward ratios while avoiding allocation to value traps and short-term fads.

The fund's performance deteriorated between 2017-2018 and 2022, causing a noticeable underperformance compared to the benchmark and several of its category peers. Nonetheless, the fund has a remarkable long-term track record, and it now stands among the above-average performers in the Focused Fund category across time periods. 360 ONE Focused Equity Fund's robust performance over the years has attracted investors' attention; its corpus has grown nearly five times in the last three years.

Over the past 5 years, 360 ONE Focused Equity Fund has registered a growth of around 23.8% CAGR, surpassing the 17% CAGR delivered by its benchmark S&P BSE 500 - TRI. An investment of Rs 10,000 in the fund 5 years ago would now be valued at Rs 29,140, while a simultaneous investment in its benchmark would now be worth Rs 21,890.

360 ONE Focused Equity Fund is consistent performer that has delivered above-average returns for its investors across various time frames. Despite occasional bouts of underperformance in the short term, the fund's ability to bounce back has resulted in strong performance and has contributed to its impressive long-term track record.

Over the longer 3-year, 5-year, and 7-year periods, 360 ONE Focused Equity Fund has outpaced the benchmark by approximately 2-7 percentage points. The fund's short-term performance is also noteworthy, wherein it has outpaced the benchmark and many of its peers.

The superlative returns have helped the fund outscore in terms of risk-adjusted returns as well and stand strong vis-a-vis its category peers. While 360 ONE Focused Equity Fund has recorded volatility in line with the benchmark and the category average, its higher risk-adjusted returns as denoted by the Sharpe ratio (0.31), sets it apart. Overall, 360 ONE Focused Equity Fund has proved its potential to deliver above-average returns and ability to manage risk effectively.

What is the investment strategy of 360 ONE Focused Equity Fund?

Classified under the Focused Fund category, 360 ONE Focused Equity Fund has a mandate to allocate a minimum of 65% of its assets in equities investing in a maximum of 30 stocks. Accordingly, the fund holds a compact portfolio of maximum 30 high conviction stocks. The scheme endeavours to identify the sectors that are likely to do well in the medium term, based on the business cycle of the economy, and take focused exposure to securities of companies in the identified sectors. The sectors are actively monitored and changes are made to invest in sectors that will benefit from the current stage of the business cycle.

360 ONE Focused Equity Fund utilises a SCDV (Secular, Cyclical, Defensives and Value Trap) investment framework to identify high conviction stocks and determine its weightage in the portfolio:

S- Secular - Companies with consistent ROE & PAT growth > 15%

C- Cyclical - Companies with PAT growth > 15% but ROE < 15%

D- Defensive - Companies with ROE > 15% but PAT growth < 15%

V- Value Traps - Companies with both ROE & PAT growth < 15%

360 ONE Focused Equity Fund employs a bottom-up approach to pick stocks across market cap segments, with a predominant emphasis on large caps. Notably, the fund has maintained a low turnover ratio of approximately 20-30% in the past one year, signifying low churning in the portfolio.

Being a Focused Fund, 360 ONE Focused Equity Fund holds a concentrated portfolio of maximum 30 high conviction stock ideas. As of October 31, 2023, the fund held 30 stocks in its portfolio. Top large-cap names like HDFC Bank, ICICI Bank, Infosys, Axis Bank, and Tata Motors currently figure among the top holdings in the fund's portfolio. The top 10 stocks together account for 53.9% of its assets. Many of these stocks have been a part of the fund's portfolio for over 2 years now.

360 ONE Focused Equity Fund has benefitted immensely from its holdings in L&T, Cyient, Axis Bank, ICICI Bank, Bharti Airtel, CCL Products (India), Tata Motors, SBI that contributed around 11% to its absolute gains in the last 2 years. Meanwhile, it booked profit in Bajaj Auto, Coal India, Dr Reddy's Laboratories, Apollo Tricoat Tubes, and SRF, among others.

360 ONE Focused Equity Fund's portfolio is skewed towards stocks in the Banking and Financial sector that collectively form around 34.7% of its assets. It also held major allocation to Infotech, Auto & Auto Ancillaries, and Engineering that together form another 35.5% of its holdings. The other core sectors in its holdings are Telecom, Power, and Chemicals, among others. The fund's portfolio is fairly diversified across cyclical, defensive, and sensitive sectors.

Is 360 ONE Focused Equity Fund suitable for my investment goals and risk tolerance?

360 ONE Focused Equity Fund has built a commendable performance track record over the years. Over the long run, the fund has outperformed the benchmark and many of its prominent peers in the category while maintaining a prudent risk profile. The fund maintains a fairly-diversified portfolio invested across a range of quality stocks which it holds with a long-term view.

360 ONE Focused Equity Fund is benchmark agnostic. The fund manager adopts a business cycle investment approach to determine sector allocation based on the probability of their outperformance or underperformance. The fund takes concentrated exposure in sectors that are likely to do well in the medium to long term. This strategy can help it to deal with market volatility going ahead, and generate decent alpha for its investors.

360 ONE Focused Equity Fund is suitable for investors seeking decent alpha through a focused portfolio of high conviction stocks with a long-term view of at least 5 years.

Note: This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

We are on Telegram! Join thousands of like-minded investors and our editors right now.

DIVYA GROVER is the co-editor for FundSelect, the flagship research service of PersonalFN. She is also the co-editor of DebtSelect. Divya is an avid reader which helps her in analysing industry trends and producing insightful articles for PersonalFN’s popular newsletter – Daily Wealth letter, read by over 1.5 lakh subscribers.
Divya joined PersonalFN in 2019 and has since then used stringent quantitative and qualitative parameters to analyse funds to provide honest and unbiased research to investors. She endeavours to enable investors to make an informed investment decision and thereby safeguard their wealth.

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.

DISCLOSURE AS PER SECURITIES AND EXCHANGE BOARD OF INDIA (RESEARCH ANALYSTS) REGULATIONS, 2014

About the Company including business activity

Quantum Information Services Private Limited (QIS) was incorporated on December 19, 1989.

QIS was promoted by Mr Ajit Dayal with an objective of providing value-based information/views on news related to equity markets, the economy in general, sector analysis, budget review and various personal products and investments options available to the Public. It was the first company to start equity research on an institutional level.

'PersonalFN' is a service brand of QIS and was started in the year 1999. In 1999, the Company registered the Domain name www.personalfn.com for providing information on mutual funds and personal financial planning, financial markets in general, etc. and services related to financial planning and research in various financial instruments including mutual funds, insurance and fixed income products to customers. It offers asset allocation and researched investment recommendations through its financial planning services.

Quantum Information Services Private Limited (QIS) is registered as Investment Adviser under SEBI (Investment Adviser) Regulations, 2013 and having Registration No.: INA000000680. In terms of the second proviso to Regulation 3 (1) of SEBI (Research Analysts) Regulations, 2014 the Company is not required to obtain Certificate of registration from SEBI.

Disciplinary history

There are no outstanding litigations against the Company, its subsidiaries and its Directors.

Terms and condition on which its offer research report

For the terms and condition for research report click here.

Details of associates

1. Money Simplified Services Private Limited;

2. PersonalFN Insurance Services India Private Limited;

3. Equitymaster Agora Research Private Limited;

4. Common Sense Living Private Limited;

5. Quantum Advisors Private Limited;

6. Quantum Asset Management Company Private Limited;

7. HelpYourNGO.com India Private Limited;

8. HelpYourNGO Foundation;

9. Natural Streets for Performing Arts Foundation;

10. Primary Real Estate Advisors Private Limited;

11. HYNGO India Private Limited;

12. Suresh Lulla;

13. I V Subramaniam.

1. ‘subject company’ is a scheme on which a buy/sell/hold view or target price is given/changed in this Research Report;

2. Neither QIS, it's Associates, Research Analyst or his/her relative have any financial interest in the subject Company;

3. Neither QIS, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one per cent or more securities of the subject Company, at the end of the month immediately preceding the date of publication of the research report;

4. Neither QIS, it's Associates, Research Analyst or his/her relative has any other material conflict of interest at the time of publication of the research report except that QIS (PersonalFN) is, as per SEBI (Mutual Funds) Regulations 1996, an associate / group Company of Quantum Asset Management Company Private Limited and Trustees and Sponsor of Quantum Mutual Fund (QMF) and to that extent there may be conflict of interest while recommending any schemes of QMF. However, any such recommendation or reference made is based on the standard evaluation and selection process, which applies uniformly for all Mutual Fund Schemes. The payment of commission (upfront / annualized & trail), if any, for any Schemes by QMF to QIS (PersonalFN) is also at arm's length and as per prevailing market practices.

1. Neither QIS nor it's Associates have received any compensation from the subject Company in the past twelve months;

2. Neither QIS nor it's Associates have managed or co-managed public offering of securities for the subject Company;

3. Neither QIS nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject Company;

4. Neither QIS nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.

5. Neither QIS nor it's Associates have received any compensation or other benefits from the subject Company or third party in connection with the research report

1. The Research Analyst has not served as an officer, director or employee of the subject Company.

2. QIS or the Research Analyst has not been engaged in market making activity for the subject Company.

Click here to read PersonalFN's Mutual Fund Rating Methodology

Quantum Information Services Private Limited CIN: U65990MH1989PTC054667 Regd. & Corp. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021

Email:info@personalfn.com Website: www.personalfn.com Tel.: 022 61361200 Fax.: 022 61361222 SEBI-registered Investment Adviser. Registration No. INA000000680, SEBI (Investment Advisers) Regulation, 2013