ASK any fund manager what are the scrips that he considers as best investments and he may rattle out 10 or at best 15 stocks. Identifying the best investment or the alpha generator among stocks can vastly be rewarding as such stocks outperform the market by a wide margin. Yet fund managers typically invest across a wide array of securities and in doing so, by their own reckoning they dilute the earnings potential of their portfolio. So what if a fund manager were to invest only in those 10-15 stocks which he strongly believes will be outperformers? This is the kind of investment strategy that the Focus 25 Fund – the latest offering from DSP Blackrock seeks to adopt.
THE FUND
The fund intends to generate long-term capital growth from a portfolio of equity and equity-related securities, including equity derivative. The fund is a 'non-diversified offering' where 95% of the money excluding cash and money market instrument will be invested across top 25 holdings. Fund manager can invest only up to 20% of the money in companies beyond the top 200 companies by market capitalisation. Most of the money (65-100%) will be invested in companies among the top 200 companies by market capitalisation. The fund has chosen BSE Sensex as its benchmark. Apoorva Shah will be the fund manager for this fund. Vinay Sambre will manage the overseas investments, if any.
INVESTMENT STRATEGY
The fund manager will employ both the topdown and bottom-up approach while selecting the investment ideas. The fund will maintain a core portfolio of long-term ideas that are expected to deliver as the India story unfolds. At the same time there will be tactical exposures to opportunities considering risk-reward ratio associated with it.
The strategy results in a concentrated portfolio of conviction ideas. This ensures that the fund manager, if gets it right, can deliver phenomenal returns as the large stake will ensure that the NAV of the fund is propelled very well. At the same time, a wrong call can pull down the NAV. In that case, the ability of the fund manager to correct his mistake with minimal loss is crucial. Put simply, this is an opportunity that involves higher rewards along with higher risks than the risk associated with an average diversified equity fund. Though it must be noted, the scheme features ensure that top 10 holding, that comprise almost 60-65% of the portfolio, will come from primarily the large-cap companies, when the fund is fully invested. This will cap the risk involved to a level much less than the risk associated with a mid-cap portfolio.
THE INVESTMENT DETAILS
The fund offers investors' growth, dividend payout and dividend reinvestment options. You can start with Rs 5,000. SIP facility is also available, where minimum instalment is of Rs 1,000. There is no entry load, but if you choose to divest before completing one year in the scheme, you will have to fork out 1% towards exit loads. Investors can also buy this fund through the stock exchange.
