The search for new schemes make investors typically pick the best performing schemes in the recent past. However it may not be the best approach.
As Nifty zooms beyond the 11,000 mark, portfolio valuations swell, and investors revisit their mutual fund holdings. At this juncture investors looking for alternatives perennially seek answer to one question – “Aur kya hai?" (Are there more investment options?). These new options could involve higher returns for some investors, rebalancing opportunity to cut the risk in case of mature investors, and thematic investments to align portfolio to current market environment for the more savvy investors.
The search for new schemes makes investors typically pick the best performing schemes in the recent past. However, it may not be the best approach. “Investors should never pick investment schemes only on the basis of past performance. One should focus on hypothesis of the funds and how relevant they are in current market environment,” says Roopali Prabhu, Head of Investment Products, Sanctum Wealth management.
Here are five schemes that are being recommended by wealth managers but not necessarily rank at the top of the performance charts.
Axis Focussed 25 Fund: Compared to other equity offerings of Axis Mutual Fund, this is a relatively new offering and runs a concentrated portfolio. The scheme is managed by Jinesh Gopani. “The scheme offers to pick the best of the investment ideas of the fund manager. Though the portfolio is concentrated it has large cap bias and actively managed. The bottom up approach should reward the investors over three to five years period,” says Renu Pothen, Head Research, Fundsupermart while recommending this scheme.
Franklin India Bluechip Fund: This large cap focussed offering by Franklin Templeton Mutual Fund has a stellar track record of 24 years. The scheme is managed by Anand Radhakrishnan, Roshi Jain and Srikesh Nair. The fund has underperformed the benchmark and the category over last one year. However this can be a good portfolio candidate hereon. “The fund manager employs value oriented approach to buy growing companies. This has ensured that the fund has done well in the long term,” explains Nishant Agarwal, Managing Partner & Head - Family Office, ASK Wealth Advisors. The stocks are not cheap anymore and inclusion of such a scheme can help your portfolio to weather volatile times.Invesco India Contra Fund: The diversified offering by Invesco Mutual Fund is a decade old one. The scheme is managed by Amit Ganatra since August 2012. Taher Badshah started co-managing the scheme since January 2017. Ashish Shanker, head – private wealth investment advisory, Motilal Oswal Wealth Management recommends the scheme saying, “The fund employs value style of investing with a contrarian approach. The fund manager focusses on bottom up approach and does not shy away from taking significant deviation from benchmark.”
The bottom up stock selection has led to significant outperformance to the benchmark. For example over past five years the scheme has delivered 22.52% as compared to 14.95% delivered by S&P BSE 500. The scheme should be tapped by investors in the current environment. “The scheme gives importance to quality of the business and margin of safety while investing in stocks. The fund has stuck to the investment mandate and has given importance to investment framework,” adds Ashish Shanker.
L&T Business Cycle Fund : The scheme has been around since CY2014 and it is managed by Karan Desai and Venugopal Manghat. The fund manager tends to invest in cyclicals when the economy is in the recovery or growth phases and switch to defensives during and economic slowdown. While the sectoral allocation is linked to the economic cycle, the manager then selects stocks on a bottom up basis.
“This fund has stuck to its mandate in the past and you should look at it as a tactical allocation with a three year horizon given the green shoots visible in the economy,” says Roopali Prabhu while recommending this scheme.
SBI Magnum Multicap Fund : The diversified offering by SBI Mutual Fund is around for past 12 years. The scheme has done well over long period of time. The scheme is managed by Anup Upadhyay. Over last three years the scheme has delivered 15.92% returns as compared to 10.2% delivered by category average. “As per our ranking methodology, the fund has been a top quartile performer based on the quantitative ranking of our risk and risk adjusted return parameters,” says Feroze Azeez, Deputy CEO of Anand Rathi Private Wealth Management.While investing in these schemes one should have at least three year view. Regular investments using systematic investment plan (SIP) can be a better way to investing given the elevated valuations.