Last Updated on June 3, 2022 at 11:13 pm
This is a performance review of Franklin India Focused Equity Fund a focused multicap fund that invests in high growth stocks. It was earlier known as Franklin India High Growth Companies Fund. After the SEBI categorization rules, it became a focused fund that can invest in a maximum of 30 stocks in the multi-cap space.
Launched in July 2007, it is the second popular Franklin equity fund with an AUM of ~ 8200 Crores, after Franklin India Equity Fund. Read its review here. You can also access the full archive of fund reviews or watch the YouTube Playlist. Also, check out yesterdays video below. I have weekly Q & A video, you can post questions on portfolio management as a comment to this video.
According to its scheme document, Franklin India Focused Equity Fund invests predominantly in Indian companies/sectors with above-average growth rates. Growth measures like Enterprise Value/EBITDA/growth rate, price/earnings/growth, forward price/sales, and discounted EPS will be used for stock selection from the NSE 500 universe. It will also combine stock-first (bottom-up) and industry-first (top-down) styles with the freedom to move across market caps.
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Franklin India Focused Equity Fund vs Peers
Using the May 2019 Freefincal Mutual Fund Screener, out of the 42 multicap funds, only 16 have outperformed Nifty LargeMidcap 250 at least 70% of every possible five year period considered (which is why that index assumes importance, click to find out how to invest in it). Franklin India Focused Equity Fund is among this 15. Fourteen out of these 15 also have fallen lower than the index with 70% consistency.
Add similar filters over every possible four years and the number becomes 11. Franklin Focused is still in. Its performance over 3,2 and 1 year periods have been about 50% only. The award for the most consistent funds in this space would go to these three (one will become large cap and the other has a bit too much AUM)
- Kotak Standard Multicap Fund Review: Too much AUM, too soon?
- Mirae India Equity Fund to become Mirae Large Cap Fund: Time to Exit?
- Aditya Birla Sun Life Equity Fund Review: Can it replace a large cap fund?
Please note that downside protection cannot be expected from a focused fund. The downside performance mentioned above is for when it was a diversified fund.
Franklin India Focused Equity Fund: Rolling returns and risk
The AMC suggests that the fund be used for needs five years and above. For these durations, the fund does have a pretty good record as we shall see below. As usual, we look at the rolling returns and rolling risk of the fund. That is we shall compare the fund vs indices (see below) over every possible 3,5,7 year periods. We shall also compare how much the monthly returns fluctuate over the same periods (rolling standard deviation). Readers interested in generating such graphs for funds of their choice can this free tool: Use this tool to compare rolling return & risk of a mutual fund with its benchmark
Three-year rolling returns
Clearly, you can see a slip in recent performance but that has occurred in the past and is not new for this fund.
Three-year rolling risk
As a focused fund, its risk will be comparable or even a touch higher than the index.
Five-year rolling returns
Five-year rolling risk
Seven-year rolling returns
Seven-year rolling risk
Over 5, 7 and 10 years (not shown), the fund has displayed fantastic consistency.
Summary: Should I invest?
Franklin India Focused Equity Fund is a good pick if
- your portfolio has an actual need for it. Meaning, you do not have any other equity fund!
- you are willing to wait at least 5Y for the fund to deliver (your needs must well beyond that!)
- you understand the risk associated with a focused fund: only 30 stocks and volatility will be high, downside protection cannot be expected.
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