Best Focused Funds 2024: Meaning, Benefits & Taxability
Mutual funds present a viable opportunity to diversify portfolios. With several mutual fund schemes and types, you can choose the right investment based on your investment goal, risk appetite, investment amount, tenure, etc. Today, we will talk about focused funds, a type of equity mutual fund known for its unique characteristics and potential returns. Let’s begin to understand focused funds in terms of benefits, drawbacks, suitability and investment considerations.
Top 10 Focused Funds to Invest in 2024
| Fund Name | Fund Size (in cr) | 3Y CAGR | Expense Ratio (%) |
|---|---|---|---|
| HDFC Focused 30 Fund | ₹11,246.61 | 30.22 | 0.50 |
| Mahindra Manulife Focused Fund | ₹1,339.01 | 27.94 | 0.42 |
| Invesco India Focused Fund | ₹2,542.41 | 26.46 | 0.63 |
| JM Focused Fund | ₹97.82 | 25.25 | 0.92 |
| ICICI Pru Focused Equity Fund | ₹7,582.58 | 25.18 | 0.56 |
| 360 ONE Focused Equity Fund | ₹6,794.35 | 22.85 | 0.87 |
| Quant Focused Fund | ₹924.73 | 22.53 | 0.70 |
| Franklin India Focused Equity Fund | ₹11,160.20 | 22.50 | 0.97 |
| Tata Focused Equity Fund | ₹1,692.74 | 21.39 | 0.62 |
| Baroda BNP Paribas Focused Fund | ₹590.64 | 21.26 | 0.50 |
Disclaimer: Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.
Note: The data on the top focused funds in India is from 15th May 2024 and is derived from the Tickertape Mutual Fund Screener.
🚀 Pro Tip: You can use Tickertape’s Mutual Fund Screener to research and evaluate funds with over 50+ pre-loaded filters and parameters.
Best Focused Funds 2024: Overview
Let’s look at the top 10 focused mutual funds to invest in 2024.
HDFC Focused 30 Fund
Founded on 1st January 2013, HDFC Focused 30 Fund Direct Plan-Growth is a Focused mutual fund scheme from HDFC Mutual Fund. The fund is managed by Roshni Jain. As of 15th May 2024, the fund’s AUM is Rs. 11,246 cr, with an expense ratio of Rs. 0.50%. Furthermore, the Net Asset Value (NAV) of the fund is Rs. 214.28.
Mahindra Manulife Focused Fund
Mahindra Manulife Focused Fund Direct-Growth is a Focused mutual fund scheme launched by Mahindra Manulife Mutual Fund. As of 15th May 2024, the fund’s AUM is Rs. 1,339 cr with an expense ratio of Rs. 0.42%. Mahindra Manulife Mutual Fund is the asset manager of Mahindra Mutual Fund, established as a trust under the Indian Trusts Act, 1882. Furthermore, the fund’s Net Asset Value (NAV) is Rs. 26.10.
Invesco India Focused Fund
Founded in September 2020, Invesco India Focused Fund Direct-Growth is a Focused mutual fund scheme from Invesco Mutual Fund. Invesco is an independent investment management firm based in Atlanta, Georgia. As of 15th May 2024, the fund’s AUM is Rs. 2,542 cr with an expense ratio of Rs. 0.63%. Furthermore, the Net Asset Value (NAV) of this mid-cap fund is Rs. 25.48.
JM Focused Fund
Founded in January 2013, the JM Focused Direct Plan-Growth is a Focused mutual fund scheme from JM Financial Mutual Fund. JM Financial Asset Management Private Limited is one of the first privately operated mutual funds companies, which commenced its operations back in 1993-94. It is a subsidiary of the much older JM Financial Group. However, as of 15th May 2024, the fund’s AUM is Rs. 97.82 cr. with an expense ratio of Rs. 0.92%. Additionally, the Net Asset Value (NAV) of this small-cap fund is Rs. 21.60.
ICICI Pru Focused Equity Fund
Founded in January 2013, the ICICI Prudential Focused Equity Fund Direct-Growth is a Focused mutual fund offered by ICICI Prudential Mutual Fund. The ICICI Prudential Asset Management Company Ltd. is the leading AMC in the country. As of 15th May 2024, the AUM of the large-sized fund is Rs. 782 cr. with an expense ratio of Rs. 0.56%. Additionally, the small-cap fund’s Net Asset Value (NAV) is Rs. 86.84.
360 ONE Focused Equity Fund
Founded in 2014, 360 ONE Focused Equity Fund is an open-ended Equity scheme belonging to 360 ONE Mutual Fund. 360 ONE is one of India’s fastest-growing wealth management and asset management organisations focused on high-conviction investment ideas, offering expertise, competence, and execution. Furthermore, the fund is benchmarked against S&P BSE 500 TRI. As of 15th May 2024, the AUM of the fund is Rs. 6,794.35 cr., and an expense ratio of 0.87 is observed.
Quant Focused Fund
Quant Focused Fund Direct-Growth is a Focused mutual fund scheme. The fund was founded in January 2013 by the Quant Mutual Fund. The Net Asset Value (NAV) of the fund is Rs. 92.82 as of 15th May 2024. The AUM of the mid-size fund is Rs. 924 cr. and has an expense ratio of 0.70%. Thus, the exit load of 1% is applicable, if redeemed within 15 days.
Franklin India Focused Equity Fund
Franklin India Focused Equity Fund is a Direct-Growth is a Focused mutual fund scheme from Franklin Templeton Mutual Fund. The fund was launched in January 2013. As of 15th May 2024, the Franklin India Focused Equity Fund has an AUM of Rs. 11,160 cr. with an expense ratio of 0.97%.
Tata Focused Equity Fund
Tata Focused Equity Fund Direct-Growth is a Focused mutual fund scheme from Tata Mutual Fund. With a bottom-up stock picking approach, the fund aims to analyse and invest in compounding stocks following the GARP-Growth At Reasonable Price philosophy. Founded in December 2019, the fund is benchmarked against Nifty 500 TRI. As of 15th May 2024, the AUM of the fund is Rs. 1,692.74 cr. and an expense ratio of 0.62% is observed.
Baroda BNP Paribas Focused Fund
Baroda BNP Paribas Focused Fund Direct-Growth is a Focused mutual fund scheme from Baroda Bnp Paribas Mutual Fund. The Baroda BNP Paribas Fund aims to achieve long-term capital appreciation in a portfolio of equity & equity-related instruments of up to 25 companies across market capitalisation. Founded in September 2017, the fund is benchmarked against Nifty 500 TRI. As of 15th May 2024, the AUM of the fund is Rs. 590.64 cr., and an expense ratio of 0.50% is observed.
Investing in Focused Funds via smallcase
Did you know that you can invest in readymade focused funds portfolios managed by SEBI-registered experts? Yes, that’s right.
You can utilise a reliable platform like smallcase to keep track of market trends and the fund’s financial performance. smallcases are modern investment products that help investors invest in stock/ETF portfolios curated to represent a theme, strategy or objective. SEBI-registered financial professionals build these with years of experience in the stock markets.
Therefore, among 500+ smallcases, here are some of the top focused fund smallcases:
Note: These smallcases are mentioned only for educational purposes and are not meant to be recommendatory. Investors must conduct their own research and consult a financial expert before making any investment decisions.
Disclosures for Mid and Small Cap Focused Portfolio
Disclosures for BM Focused Small Cap
However, if you’re confused about which stocks to pick, you can explore smallcases:
- smallcases are readymade portfolios of stocks/ETFs, that are based on a theme idea or strategy
- They’re created and managed by SEBI-registered experts
- smallcase.com offers over 200+ stock portfolios, created by 180+ managers
- Some of the popular smallcases among new investors are as follows:
Disclosures for aforementioned smallcases
What are Focused Funds?
Focused funds are a type of equity mutual fund that invest in a limited or small variety of stocks and bonds. According to SEBI or the Securities and Exchange Board of India, focused equity mutual fund schemes invest in less than 30 companies to have a concentrated portfolio. Thus, as the name suggests, the focused fund can only focus on a maximum of 30 stocks.
This particular fund stands out due to its unique investment guidelines, unlike other funds that have the flexibility to invest in a maximum of 100 stocks. Focused funds may focus on large-cap, mid-cap or small-cap funds. Thus, the primary objective of a focused fund is to optimise returns by investing in top-performing assets.
How Does a Focused Mutual Fund Work?
As per the SEBI guidelines, focused funds allocate at least of 65% of their assets to equity and equity-related instruments. Unlike large-cap, mid-cap, or small-cap funds, these mutual funds are not restricted to specific market capitalisations. A focused fund can have exposure to a maximum of 30 stocks, so there is no restriction on where it can invest. However, in technical terms, it is known as running a concentrated portfolio with limited stocks.
Focused funds, therefore, can be potentially volatile, especially during the short term, since they are equity-oriented. Additionally, a lower number of stocks can potentially lead to high concentration risks for investors. So, this type of investment is suitable for investors who have a high risk tolerance and long-term investment horizon to avoid short-term market volatility.
Features of Focused Funds
The features of the focused mutual funds in India are:
- Limit on Equity Investments: According to the Securities and Exchanges Board of India (SEBI), focused funds can strictly invest in 30 or less equity funds. Thus, Fund managers can choose the best 30 focused mutual fund schemes after doing their own research.
- Portfolio Diversification Across Sectors & Market Cap: Focused funds can be used to make investments in any company. This means they can own stocks from various market capitalisations, which allows investors to maintain a diversified portfolio even if the number of funds is limited.
- Long Term Horizon: Since focused mutual funds are equity-oriented, they can be considered suitable for achieving long-term goals such as buying a house, investing in children’s education and even retirement planning.
Benefits of Investing in the Best Focused Equity Funds
Let’s look at the benefits of investing in the best focused funds.
- Potential to Generate High Returns: Fund managers conduct research and select 30 stocks that demonstrate strong performance or exhibit potential for future growth. They also ensure adequate asset allocation. Additionally, a diversified equity-oriented fund also helps in minimising risk exposure.
- Exposure to Selected Stocks: Focused funds can only invest in 30 stocks, making it crucial for fund managers to handpick stocks carefully. Thus, if the picks are right, the upside of the investments can be higher.
- Diversification: Although these funds maintain a focused portfolio of up to 30 stocks, they have the flexibility to select these stocks from various sectors. This helps to prevent the portfolio from becoming overly concentrated in any specific sector.
Who Should Invest in Focused Funds?
As you may have noticed, choosing and investing in the maximum number of 30 companies in the fund requires a strategic approach. So below are some of the categories of investors who can consider investing in focused funds.
- Investors with Experience: Focused funds can be suitable for seasoned investors who are well-versed in the market. These funds tend to be more volatile than other mutual funds, as they respond swiftly to sector-specific developments, leading to potentially higher returns and greater risk.
- Investors with Long Investment Horizon: Investors aiming for long-term growth can consider investing in focused mutual funds. These funds concentrate their portfolio on a limited number of stocks, typically 30 or fewer, allowing them to take high-conviction bets on companies they believe have strong growth potential.
- Investors Seeking Concentrated Portfolio: Focused funds can be a suitable option if you prefer to concentrate your investments in specific sectors or themes rather than diversify across various company types or industries.
- Investors Seeking for Potentially Higher Returns: For risk-tolerant investors, focused funds offer the potential for maximum returns despite the higher risks involved.
Factors to Consider While Investing in Focused Funds
Here are some of the factors to consider while investing in the focus mutual funds:
- Risk: Focused mutual funds run a concentrated portfolio of a maximum of 30 stocks. This lack of diversification is the primary source of risk associated with these funds, making them inherently riskier compared to diversified mutual funds such as multi-cap funds.
- Cost: The expense ratio depicts the overall annual expenses of managing a mutual fund. Select funds that have low expense ratios, as this can affect the returns. The higher the expense ratio, the lower the returns.
- Market Condition: Economic and market conditions can potentially influence fund performance. It is advisable to assess the present market cycle and its compatibility with the fund’s investment strategies.
- Investment Horizon: Given that focused funds typically invest in a restricted number of stocks, the fund may experience short-term volatility. Therefore, this option may not be ideal if your investment horizon is short. The investment horizon should be at least 5 years or more.
Potential Risks of Investing in Focused Equity Funds
Now that we have covered benefits, let’s examine the potential risks associated with focused mutual funds.
- Higher Risk: The concentrated portfolio composition of focused funds inherently carries risk compared to Diversified Funds. Thus, fluctuations in the performance of key stocks within the portfolio can significantly impact the fund’s overall performance.
- Short-term Volatility: In the short term, these investments may exhibit fluctuations in returns due to the limited number of stocks within the portfolio.
Tax Implications on Focused Mutual Funds
The taxation of focused funds aligns with that of other equity funds. If investments are held for over a year, resulting gains are categorised as Long-Term Capital Gains (LTCG) and subject to a 10% tax rate, applicable when annual gains surpass Rs. 1 lakh. However, selling holdings within a year incurs Short-Term Capital Gains (STCG) taxed at a rate of 15%.
To Wrap It Up…
Focused funds are equity-oriented mutual fund schemes that focus on a limited number of stocks. This opens up an opportunity for fund managers to invest in any best-performing stocks belonging to any sector or market capitalisation. As an investor, one can be assured in terms of portfolio diversification. However, this fund also carries a few potential risks to consider before investing.
Most Popular Mutual Funds:
As an investor to have a diversified mutual funds portfolio, you might also like to know more about these different types of funds for investing –
Frequently Asked Questions (FAQs) on Focused Funds
‘Best Idea Funds’ or ‘Focused Funds’ meaning is that they focus on running a concentrated portfolio of 30 stocks. They provide market exposure to deliver maximum returns by investing in high-performing assets.
Based on the 3Y CAGR, the top focused mutual funds to invest are:
(a) HDFC Focused 30 Fund
(b) Mahindra Manulife Focused Fund
(c) Invesco India Focused Fund
(d) JM Focused Fund
(e) ICICI Pru Focused Equity Fund
Note: This is for educational purposes, and is not recommendatory.
Yes, you can invest in focused funds in the form of systematic or lumpsum investments as per funds availability and your overall investment strategy.
There is a clear difference between the two funds. Unlike large-cap funds that invest in large-cap stocks and value funds that invest in undervalued stocks, focused funds have no such restrictions. The fund manager can make a concerted portfolio of 30 stocks in different sectors.
No, focused funds do not have a lock-in period. You can redeem your investments anytime. However, to maximise potential returns, it is advisable to stay invested in this fund for at least 5 to 7 years.
