Suitable for investors with moderate risk profile and for long-term wealth creation
This 16-year old fund invests in wealth creating companies across all sectors and market cap ranges. And we like this fund for its average, but safe performance as the fund does not deviate much from its category average in a bull phase. The fund's performance over the long run further affirms our belief; over the past 15-years it is the best performing fund among its peers that are that old delivering an annualised 26 per cent return.
A downside protection capability of this fund is legendary. In 2007, the fund manager stayed away from power sector stocks and entered metal stocks only in October despite the rally in these sectors. Rajah agrees to this move impacting performance but believes the stringent screening mechanisms had checked on their exposure to momentum based sectors. The move paid dividends in 2008 when these sectors were amongst the worst hit. Despite being fully invested, in 2009 the fund failed to match up to its peers.
Rajah stays away from the momentum play and invests in stocks that perform well over market cycles. This has helped the fund protect its investors better during market downturns but has also resulted in a subdued performance during market rallies. "We adopt a buy and hold strategy in line with our medium to long term views on a company. Any short-term trades made are also in line with the overall portfolio strategy, and are mainly driven by changes in market conditions relative valuations," says Sukumar Rajah, Managing Director & CIO—Asian Equities, Franklin Templeton Investments.
Our View
The fund predominantly invests in large-caps but does take exposure to mid- and small-cap stocks to boost returns. The fund's expertise in retaining the gains made during the bull phase of the markets and staying invested irrespective of the market condition can suit an investor with moderate risk profile and for those planning to build a long-term portfolio. However, investors who expect the mid- and small-cap exposure to prop up overall return will find the large-cap bias to be a damper.
