NFO Review – Invesco India Focused 20 Fund
While diversification is a good way to preserve wealth, concentration is often a better way to build a fortune.
The Focused Fund category has been in focus and preferred by investors who like concentrated, high conviction bets.
The strategy behind focused funds is to generate alpha with investment targetted in high conviction stocks which may come with a bit higher risk compared to diversified funds.
For the last few years, we have observed that within an Index there have been huge disparities in the performance of stocks. Reliance has performed 41.24% YTD, INFY 26.97% while Nifty has generated -5.38% returns YTD. FANG Stocks have hugely outperformed all global markets.
Unprecedented challenges and high stock market volatility now call for a greater focus on stock selection. Adding to that extraordinary vigil and meticulous approach is needed for a successful portfolio.
Fund Managers with concentrated portfolios can exercise better control and vigil on their high conviction ideas.
Invesco Mutual Fund has come up with a new fund offering Invesco India Focused 20 Fund.
The Key features of the same are under :
- Striking a balance between conviction and diversification –The fund portfolio will not exceed 20 stocks. The fund will have a sizeable allocation to each stock idea yet maintain an equilibrium between conviction and diversification
- Multicap portfolio -The fund will invest across market capitalization with the flexibility to move across market cap bands. Currently, they plan to invest – Large Cap (50-70%), Midcaps (30-50%) & Small Caps (0-20%) of the portfolio.
- Blend of growth and value stocks – This feature differentiates it from other focused funds, the majority of the focused funds invest in growth stocks. Invesco Focused fund’s portfolio will comprise both growth and value stocks, i.e. high growth companies as well as the companies demonstrating higher growth prospects but available at reasonable valuations.
- Stock selection will be guided by Invesco’s investment philosophy and proprietary stock categorization framework. Their process-driven approach will assist in filtering the best investment ideas and contain the downside risk
- Stringent risk management – Risk management is an integral part of AMC’s investment process. They have incorporated adequate safeguards to manage risk in the portfolio construction process.
- The fund will adopt a fully invested approach (~95% invested) based on the AMC’s current view on equity market
- NFO Opens 9th September 2020 and closes on 23rd September 2020
The performance of Focused funds compared to large-cap funds is as below :
Should you Invest?
The fund is recommended for investors who have a long term view and prefer concentrated bets. You can allocate 10-20% of your portfolio to focused funds for a better alpha but one should keep in mind that they come with a bit higher risk compared to diversified funds.