Kotak Emerging Equity Scheme Review: Will this work in a bear market?

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This week, let us look at Kotak Emerging Equity Scheme a mid cap scheme launched in March 2007 with a current AUM of about 4000 Crores (7th the mid cap segment). If someone from Kotak AMC is reading this, please recognise that your website is badly broken. I cannot get to this schemes page, cannot download scheme documents and notices. So I had to piece this review with the information I could find here and there.

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Kotak Emerging Equity Scheme Review: Will this work in a bear market?

Kotak Emerging Equity Scheme: Investment strategy

The fund was started as a mid cap and small cap fund benchmarked to BSE MidSmallCap Index and due to the SEBI categorization rules had to become a more pre-dominant midcap scheme with NIfty Midcap 100 TRI as the benchmark.

It still takes on significant small cap exposure ( 30% in Aug 2018) and currently 12%. At least at current AUM levels, this would persist for some time but also means higher volatility. It does not have an impressive since inception history with performance picking only in the last 5 years or so.

Kotak emerging Fund since inception performance
Courtesy: Value Research

Five-year rolling returns and risk

The above trend is also seen in the five-year rolling return plot.Kotak Emergingn Equity 5Y Rolling Returns

Risk-wise the fund has been less volatile than its current benchmark.

Kotak Emergingn Equity 5Y Rolling RiskComparison with peers (returns)

We shall now compare Kotak Emerging Equity with its peers in the mid cap space.

Seven years

kotak emergining equity scheme vs peers 7Y returns

Five years

kotak emergining equity scheme vs peers 5Y returns

Three years

kotak emergining equity scheme vs peers 3Y returns

You would hopefully agree that there is nothing spectacularly right or wrong about Kotak Emerging Equity.

Comparison with peers (returns)

In term of risk too, the fund has had a reasonable record although Franklin Prima has a better record.

kotak emergining equity scheme vs peers 5Y risk


I did not enjoy writing this as it was hard to get information from the AMC site. Performance-wise Kotak Emerging Equity is “okay”. Like L&T Midcap Fund (read review here) this too has turned around its performance when the market rallied toward the end of 2013.

How can I choose among these funds If I want to? To answer this, I need to insert another graph. The 3Y rolling return comparison with peers and NIfty 100 Midcap.

Selecting a mid cap fundI would avoid Axis Midcap and HDFC Midcap Opp (I am talking like a new investor and not an existing one). I prefer performance when the chips are down. So L &T is the winner (in this window) with Kotak second and Franklin third. If you look above, there is not much difference between Kotak and L &T Funds. So it is essentially a coin toss.

Will this work in a bear market?

Just like L&T Mid Cap, I feel Kotak Emerging Equity Scheme is also untested in a bear market or a sideways market. Here Franklin Prima would score due to its large cap tilt. In any case, if you want to choose the Kotak or L&T funds, be ready for a bumpy ride.

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About the Author M Pattabiraman author of freefincal.comM. Pattabiraman(PhD) is the author and owner of freefincal.com.  He is an associate professor at the Indian Institute of Technology, Madras since Aug 2006. Pattu” as he is popularly known, has co-authored two print-books, You can be rich too with goal based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management.  He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. Pattu publishes unbiased, promotion-free research, analysis and holistic money management advice. Freefincal serves more than one million readers a year (2.5 million page views) with numbers based analysis on topical issues and has more than a 100 free calculators on different aspects of insurance and investment analysis. He conducts free money management sessions for corporates  and associations(see details below). Previous engagements include World Bank, RBI, BHEL, Asian Paints, TamilNadu Investors Association etc. Contact information: freefincal {at} Gmail {dot} com (sponsored posts or paid collaborations will not be entertained)
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