After SEBI's MF re-categorisation exercise, how is a Focussed Fund different from a Multi-Cap fund? Know the difference and risk impact before investing.
Mirae Asset Mutual Fund has launched a new fund offer (NFO) called Mirae Asset Focussed Fund, which is open for subscription from April 23 to May 7, 2019, and will re-open for regular subscriptions from May 15, 2019.
Mirae Asset Focussed Fund is an open-ended equity scheme and will invest only up to a maximum of 30 stocks. To manage concentration risk, the fund has the mandate to diversify across large cap, mid cap and small cap category.
Being an equity-oriented fund, the minimum allocation to equities will be 65 per cent while a maximum of 35 per cent can be allocated towards debt. This is the mandate of the fund, however, the allocation is expected to be more towards equities in the long run.
The minimum investment amount is Rs. 5,000 and the fund has both the regular plan and direct plan. The fund comes with Growth Option and Dividend Option (Payout & Re-investment). The exit load is similar to most other equity schemes, i.e. 1 per cent of the fund value if redeemed within 1 year (365 days) from the date of allotment and nil thereafter.
What to do
After the Securities and Exchange Board of India’s (Sebi) mutual fund re-categorisation exercise, every fund house can now have only one fund in each category. Mirae Asset Focussed Fund intends to be the fund in the ‘Focussed Category’. Importantly, as per SEBI’s new rules, there is a thin line of differentiation between the two categories of ‘Multi-cap fund’ and a ‘ Focussed fund’.
While both of them are mandated to invest a minimum of 65 per cent in equities and diversify across large-mid-small caps stocks, a Focussed Fund has the upper cap of holding 30 stocks in its portfolio. A Multi-cap fund has to diversify across market capitalization and has no restriction on the number of stocks it can hold.
The fund manager of Mirae Asset Focussed Fund is Gaurav Misra and the fund’s benchmark index is Nifty 200 Index (TRI). The performance of the fund will hinge primarily on stock selection and the role of the fund manager will be important.
As per Valueresearchonline data as on April 24, 2019, the 1-year ranking of the Direct plans are:
Mirae Asset Emerging Bluechip Fund – 1/22
Mirae Asset India Equity Fund – 2/45
Mirae Asset Tax Saver Fund – 1/35
The Riskometer of the fund indicates that the fund carries ‘Moderately High Risk’. Opt for this fund if you have an investment horizon of at least seven years or more and do not hold any Focussed Fund or a Multi-Cap Fund in your portfolio.
But, if you already have a Focussed Fund or a Multi-Cap Fund in your portfolio, you need to check Mirae Asset Focussed Fund’s tilt towards which stocks and market cap before investing in it. Holding more than one fund with almost similar exposure to stocks or market-cap may not serve the purpose well.