ABSL Top 100 Fund was launched as a large-cap mutual fund that was focused on the top 100 companies by market capitalisation. Over the past five years, the scheme maintained a portfolio of about 50-70 stocks in its portfolio.

Effective from May 21, 2018, as per its new mandate, the decade old fund will need to restrict its exposure to only 30 stocks. This concentrated portfolio will have a bearing on the overall risk of the fund and the return potential.

Maintaining a concentrated portfolio of stocks has its own pros and cons. While the return potential is higher, so is the risk. Thus, it all boils down to the fund manager’s skill and experience.

ABSL Focused Equity Fund continues to be managed by Mr Mahesh Patil, Co-Chief Investment Officer of ABSL Mutual Fund. He has over two decades of experience and has been the fund manager of this large-cap fund since July 2010.

In terms of performance, the erstwhile-diversified equity mutual fund did a reasonable job in rewarding investors over the long term. The portfolio of the fund was predominantly large-cap, with a trace of mid-caps. However, like a few other large cap funds, the scheme has struggled to deliver returns over the past one year.

It needs to be seen if the fund will be able to regain its past glory with its new investment focus.

In this brief analysis, we take a close look at the features and performance of Aditya Birla SL Focused Equity Fund.

For the entire list of scheme names changes, do read: Your Mutual Fund Scheme Renamed. What Should You Do?

Investment Objective of Aditya Birla SL Focused Equity Fund (erstwhile ABSL Top 100 Fund)

Aditya Birla SL Focused Equity Fund has an investment objective to "achieve long term capital appreciation by investing in upto 30 companies with long term sustainable competitive advantage and growth potential."

The erstwhile fund, Aditya Birla SL Top 100 Fund had an investment objective to “provide medium to long-term capital appreciation, by investing predominantly in a diversified portfolio of equity and equity related securities of top 100 companies as measured by market capitalization”

Aditya Birla SL Focused Equity Fund Details

Fund Facts

Category	Focused Fund	Style	Blend
Type	Open ended	Market Cap Bias	Large-cap
Launch Date	24-Oct-05	SI Return (CAGR)	14.69%
Corpus (Cr)	Rs 4,212	Min./Add. Inv.	Rs 1,000 / Rs 1,000
Expense Ratio (Dir/Reg)	1.07% / 2.32%	Exit Load	1%

Portfolio Data as on April 30, 2018.
SI Return as on May 30, 2018.
(Source: ACE MF)

Under normal circumstances, Aditya Birla SL Top 100 Fund allocated…

• 80% - 100% of its assets in equity & equity related instruments. Of which,

• 65%-100% - towards top 100 market cap companies

• 0-35% -towards other market cap companies

• 0% - 20% in Money Market Instruments.

From May 21, 2018, the new scheme Aditya Birla SL Focused Equity Fund will allocate –

• 65% - 100% to equity and equity related securities (max 30 companies)

• 0-30% to Debt/Money Market Instruments

Growth Of Rs 10,000, If Invested In Aditya Birla SL Focused Equity Fund Plus 5 Years Ago

Aditya Birla SL Focused Equity Fund: Year-on-Year Performance

Aditya Birla SL Focused Equity Fund: Performance Vis-à-vis Category Peers

Rolling Period Returns

Scheme Name	Corpus (Rs Cr)	1 Year (%)	2 Year (%)	3 Year (%)	5 Year (%)	Std Dev	Sharpe
Axis Focused 25 Fund	3,714	28.00	20.92	15.56	17.97	14.43	0.18
JM Core 11 Fund	35	25.65	24.93	15.39	19.17	18.45	0.13
SBI Focused Equity Fund	2,681	23.92	18.36	14.66	18.67	12.80	0.17
Franklin India High Growth Cos Fund	7,602	19.71	16.51	13.65	23.51	14.68	0.05
Essel Large Cap Equity Fund	154	19.65	16.70	12.72	15.17	13.08	0.10
IDFC Focused Equity Fund	1,561	35.51	22.33	12.61	15.11	14.13	0.12
Reliance Large Cap Fund	9,833	23.35	17.31	12.15	18.38	14.01	0.08
DSPBR Focus Fund	2,961	16.22	14.63	11.95	17.18	13.88	0.05
HDFC Focused 30 Fund	556	21.22	17.60	11.68	16.73	16.33	0.08
Aditya Birla SL Focused Equity Fund	4,212	18.65	16.32	11.59	18.45	12.61	0.08
Invesco India Largecap Fund	142	17.76	14.13	10.98	16.20	11.83	0.08
HSBC Large Cap Equity Fund	699	20.05	17.40	10.39	14.31	13.05	0.09
Principal Focused Multicap Fund	305	18.60	15.71	10.39	15.83	13.31	0.07
Edelweiss Large Cap Fund	134	19.58	14.20	10.26	16.02	13.09	0.06
BNP Paribas Large Cap Fund	932	18.86	12.69	10.19	17.37	13.78	0.03
IDBI India Top 100 Equity Fund	421	15.92	12.78	10.15	16.03	13.06	0.01
DHFL Pramerica Large Cap Fund	400	17.22	13.55	10.11	16.10	12.32	0.05
HDFC Top 100 Fund	15,031	19.86	17.90	9.93	15.88	15.40	0.06
Tata Large Cap Fund	799	16.99	13.65	9.88	14.71	12.53	0.05
L&T India Large Cap Fund	397	16.98	13.02	9.32	15.43	13.08	0.05
Nifty 50 - TRI		19.78	15.33	9.00	14.01	12.71	0.08

Returns are on a rolling basis and those depicted over 1-Yr are compounded annualised.
Data as on May 30, 2018
(Source: ACE MF)  

*Please note, this table only represents the best performing funds based solely on past returns and is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. Past performance is not an indicator for future returns. The percentage returns shown are only for indicative purposes.

On rolling return basis, ABSL Focused Equity Fund has done well in the longer-term periods. As seen in the year-on-year performance charts in the earlier section, bulk of the outperformance in the 3-5 year periods came in the 2014-15 period. Thus, if we excluded this period, the returns are lacklustre, as denoted by the 1-year and 2-year returns. In the 1-year rolling periods, the fund has trailed the benchmark.

Aditya BSL Focused Equity Fund's return comes at lower volatility when compared to its peers in the Focused Fund and Large Cap Fund categories. The risk is also marginally lower than the benchmark. However, this may dully change going ahead, given that the fund will be adopting a concentrated strategy. It needs to be seen, if the fund can deploy effective risk management strategies to keep risk low.

The top five mutual funds with a similar investment objective and market-cap bias in the 3-year rolling period performance include—Axis Focused 25 Fund, JM Core 11 Fund, SBI Focused Equity Fund, Essel Large Cap Equity Fund, and IDFC Focused Equity Fund.

Investment Strategy of Aditya Birla SL Focused Equity Fund

The erstwhile investment strategy focused on large market capitalization stocks and a growth cum value style of investing. The investment emphasis of Aditya Birla SL Focused Equity Fund would now be on investing in a maximum of 30 companies with sound corporate managements and prospects of good future growth. The Fund's focus shall be biased towards large cap companies driven by long-term fundamentals though not limited to it.

The erstwhile investment strategy focused on large market capitalization stocks and a growth cum value style of investing. The investment emphasis of Aditya Birla SL Focused Equity Fund would now be on investing in a maximum of 30 companies with sound corporate managements and prospects of good future growth. The Fund's focus shall be biased towards large cap companies driven by long-term fundamentals though not limited to it.

Aditya Birla SL Focused Equity Fund - Portfolio Allocation and Market Capitalisation Trends

Aditya Birla SL Focused Equity Fund – Top Portfolio Holdings

Top 10 Stocks   Stocks % of Assets HDFC Bank 8.27 ITC Ltd. 5.79 ICICI Bank Ltd. 5.64 Infosys Ltd. 5.63 Maruti Suzuki India Ltd. 4.09 Larsen & Toubro Ltd. 3.44 Dabur India Ltd. 2.98 L&T Finance Holdings Ltd. 2.94 Yes Bank Ltd. 2.92 NTPC Ltd. 2.91	Top 5 Sectors
Holdings (in %) as on April 30, 2018 (Source: ACEMF)

ABSL Focused Equity Fund usually holds around 50-70 stocks in the portfolio. The portfolio holdings averaged around 65 stocks in the past year (2017). Currently, the number of stocks as per its portfolio disclosed for April 2018, is down to 46 stocks. The number of holdings is expected to go down further to 30 stocks, as the portfolio for May 2018 needs to comply with the new categorisation norms.

The top 10 holdings account for 45% of the entire portfolio. HDFC Bank, ITC, ICICI Bank, Infosys and Maruti Suzuki are the top 5 holdings. The top four stocks command an exposure of 5% each.

The sector allocation of ABSL Focused Equity Fund remains skewed towards banks. While banks account for 19% of the entire portfolio, HDFC Bank contributes 8% to the entire holdings. The remaining part of the portfolio remains reasonably diversified across the top 5 sectors.

Top Gainers in Aditya Birla SL Focused Equity Fund's portfolio

Out of the 46 stocks, about 29 stocks have been held for over a year. This gives a sense that Aditya Birla SL Focused Equity Fund prefers to hold the stock for the long term. Among the top performers in the portfolio, with an average holding above 1%, were Tech Mahindra, Tata Steel and Reliance Industries. These stocks gained 61%, 39%, and 38% respectively over the past year.

There were a few laggards as well. India Oil Corp, Tata Motors, and Bharat Electronics were among the large-caps that declined in value. These stocks fell by 26%, 26%, and 21% respectively.

Suitability of Aditya Birla SL Focused Equity Fund

A number of equity schemes maintain a focused or concentrated stock portfolio. While some have done exceedingly well, others have faltered. A few sour stocks can create a drag on returns. Therefore, while these schemes come with the potential to deliver high returns, the risk involved is even higher.

At the same time, funds that are restrictive in their investment approach or those funds that invest only in a concentrated portfolio can be volatile and may fail to generate adequate returns over the long term.

Hence, a deeper look is required to understand how is the fund likely to perform going ahead. But one thing for sure, with a concentrated portfolio, the fund will not be devoid of volatility. But unlike a few other funds in the focused category, ABSL Focused Equity Fund maintains a large cap bias. Hence, this focus of the fund will help it to provide stability to the returns.

That said, large-cap oriented funds are better poised to handle market volatility vis-à-vis mid-and-small caps. Stable businesses, greater market share, quality of management and the sustainability prospects are factors that seem convincing to take exposure to large-caps at the current level.

Large blue chip companies with strong balance sheets and proven track-records could help ride the wave of short-term volatility to a certain extent. Therefore, diversified equity funds with a predominant large-cap allocation can offer stability to your investment portfolio.

Some large-caps take an opportunistic allocation to mid-caps and offer the perfect mix of stability and growth. Therefore, it is pertinent to review large cap funds even on its ability to limit downside during falling markets. However, this has not been the case with ABSL Focused Equity Fund. Hence, its returns are in line with the benchmark, unlike other schemes that took an opportunistic exposure to mid caps.

As ABSL Focused Equity Fund will now adopt a new strategy, it needs to be seen how it plays out, both in terms of risk and return, over the next 6 months to 1 year.

If you plan to invest in Focused Funds or Large Cap Funds, or both, like in the case of Aditya Birla Sun Life Focused Equity Fund, do ensure that the investments are in line with your financial goals. If you are not sure about how to align these schemes with your tax planning or financial goals, do consult your financial planner or investment advisor.

Note: This write up is for information purpose and not a recommendation to buy or sell the mutual fund scheme. 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.

Editor's note: PersonalFN has a long track record of offering unbiased mutual fund research services. It analyses thousands of data points to shortlist schemes and also applies a whole host of qualitative parameters to select only a handful schemes for your portfolio.  Do try PersonalFN’s Premium Mutual Fund Research service ‘FundSelect’ Every month, our FundSelect service will provide you with an insightful and practical guidance on which mutual fund schemes to buy, hold or sell, which will assist in creating the ultimate portfolio that has the potential to beat the market. And there’s more great news! FundSelect is turning FIFTEEN. And on this auspicious 15th anniversary of FundSelect, we intend to make it “ultra-special” for you. How? Well, how about getting 1 Year of access to FundSelect virtually Free? And if you wish, perhaps even MORE... Check out the exciting offers that can be availed on subscriptions to FundSelect here. Go ahead and subscribe to PersonalFN’s FundSelect NOW!

 

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