Last Updated on December 29, 2021 at 12:16 pm
This is a performance review of ABSL Frontline Equity Fund. We compare the risk and reward of this fund with its benchmark and popular large cap peers. Launched in Aug. 2002, Frontline equity is the largest actively managed large cap fund as on date. Like many of its peers, this too had the freedom to choose from the top 200 stocks by market cap, but had to change gears from June 2018. Let us first consider its investment strategy. You can check out all freefincal fund reviews from here.
ABSL Frontline Equity Fund: Investment strategy
What are frontline stocks? Stocks, which in the opinion of its Fund Manager, provide superior growth opportunities. The previous benchmark was BSE 200 and it has been replaced with Nifty 50. So the investment universe has dropped by half now. More importantly, the fund tries to match the sectoral diversification of the benchmark index (why?!) each quarter with some relaxation in the limits (see link above). This does not however mean the same stocks as the index would be found in each sector chosen by the fund. Going forward, I think this too like all other large caps may find it tough to outperform Nifty 50. I think ABSL has deliberately chosen Nifty 50 instead of Nifty 100 as the benchmark to show outperformance in the future.
ABSL Frontline Equity Fund vs Nifty 50 vs Peers (15 years)
There is not much difference in Nifty 50 and Nifty 200 (or BSE 200) returns. So we will use Nifty 50 as the index for comparison. First let us compare the fund with its peers over a 15 year period. The graph just below gives 364 rolling returns and the one below that the rolling standard deviation or risk.
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! 🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
Clearly this is over a short period in time, but that is all that we can work with. During this window, Franklin Blue chip has fallen the most in terms of outperformance. In terms of risk, HDFC Top 100 is unacceptably high. The outpeformance gap between ABSL Frontline Equity and NIfty 50 is consistently high and the fund has lower risk than Nifty 50.
ABSL Frontline Equity Fund vs Nifty 50 vs Peers (10 years)
If we consider a ten year window, we have more data points and a couple of more peers for comparison.
While ABSL Frontline has consistently outperformed the index over ten years also, the quantum of outperformance has dropped in the last couple of years. The funds seem to be rapidly heading towards Nifty. New investors must keep this in mind. Franklin Bluechip is less volatile than the ABSL fund.
ABSL Frontline Equity Fund vs Nifty 50 vs Peers (5 years)
For five years, we use the older large cap funds for comparison else it would be difficult to decipher the lines. Again ABSL Frontline has done well. Look at the sudden increase in volatility for HDFC Top 100.
ABSL Frontline Equity Fund vs Nifty 50 (3 years)
If you are worried about the recent underperformance of the fund, it is clear from the above graph it has happened before. So old investors can consider giving the fund some more time to perform (but no guarantees)
Summary
ABSL Frontline equity has been one of the best performing large cap funds. However, it has 200 stock investment universe to beat Nifty 50. Now it has been reduced to 100 (80% of the portfolio). Tying to align sector weights with Nifty 50 instead of BSE 200 may or may not influence future performance. So older investors must (1) temper expectations going forward and (2) keep an eye on performance.
New investors can consider this fund as a low risk alternative to the Nifty 50. However there is no guarantee that if you wait for 5 years that this or any other large cap fund will beat the Nifty 50. I think new investors should stay away from at least large cap and build their portfolio with an aggressive hybrid fund as the core: Why Aggressive Hybrid (balanced) Mutual Funds score over diversified funds. Also see: 11 aggressive hybrid (balanced) mutual funds that have beat Nifty 100!!
If you are an investor in HDFC Top 100, I think it is time to quit. If you hold SBI Bluechip or Franklin Bluechip then you need to have one foot outside the door. This means new investors should avoid them.
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter using the form below.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
About The Author
Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel
This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)