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Focused equity funds are managed by professional fund managers with in-depth knowledge and expertise in selecting and managing a focussed portfolio of stocks. These fund managers conduct extensive research and dive deep into companies that offer strong growth potential but are undervalued by the market.
- Note: Data as of December 13, 2023, performance of above one year is annualised Category average denotes the performance of 26 focused funds
- Source: CRISIL Research Past performance may or may not be sustained in future
Moreover, focused equity funds provide investors with exposure to specific sectors or themes, such as technology, healthcare, or energy, allowing them to align their portfolios with their investment preferences. This targeted approach can be particularly appealing for investors with conviction in a particular sector.
Focused equity funds also offer higher transparency and accountability. With a smaller number of stocks in the portfolio, investors can easily track and understand the fund’s performance and gain deeper insights into the investment decisions of the fund manager, leading to greater control and confidence in their investments.
Diversification within a concentrated portfolio is another feature of focussed equity funds. While the number of stocks is typically limited, the chosen sectors can be different, offering some diversification.
However, it is important to note that focused equity funds also come with certain risks. A concentrated portfolio means the overall fund performance may be hurt by underperformance of the selected stocks. Moreover, success of these funds relies heavily on the fund manager's ability to select winning stocks and to actively manage the portfolio.
Therefore, investors should carefully assess the track record and expertise of the fund manager before investing in a focused equity fund.
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