The Mutual Fund Show: Everything You Need To Know About Multi-Asset Funds

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You mentioned in one of in the opening answer that for a long-term investor the mid-cap category might not be a bad idea. Now, we were looking at the mid-cap category—YTD performers, three-year performers and there were two or three funds which stood out in terms of really good performances. There was Mirae, there was Axis, I think UTI mid-cap, Edelweiss did well. So, there are these three or four funds which have done very well. Do you like any of these as a mid-cap fund which people can approach? Why or why not?

Bajpai: Out of these, I have picked Mirae, so I’ll talk about that one. Though I am invested in Axis myself in the mid-cap but I like Mirae and I’ll tell you why. First is, I feel it comes from a very sound fund house and they have actually proven their worth especially in terms of stock picking in the mid cap category. Second, they’re very clear in terms of the sectoral allocation. So, it’s typically that you have the benchmark kind of an approach when it comes to the sectoral allocations and within those sectors, is where they use their skills and they do the stock picking. It’s a compact portfolio. It should not go beyond 50, it’s around 49-50 currently and yet it’s well diversified with a capping of about 5% maximum that you’re planning to allocate to any particular stock. Now, if we deep dive and if we see how this is constructed and when you are talking about Mirae, it’s hard to not mention about the emerging blue chip. So, if you actually go back and see how emerging blue chip was constructed, the framework of Mirae mid-cap is very similar to how emerging blue chip initially was. So that’s one interesting thing in terms of the approach because it’s a combination of growth and values, it’s a blend. The capping at 4- 5% per stock that’s been followed here as well, which was done in emerging and the fund manager who’s currently managing the mid-cap, Ankit Jain, is assisting Nilesh Khurana in the emerging blue chip since the January of 2019. This fund was launched in middle of summer of 2019 after a bit of his probably six months orientation. Of course, it’s the same fund house and structurally also there’s some similarity. Having said that, there is no guarantee that this is going to be the next best performer from the fund house. Nothing like that, but it’s a nice, diversified combination. Also, we will be comparing this fund with the other names UTI, SBI and Edelweiss. Currently, even if we are seeing from the valuation point of view, the portfolio has the least PE and the PB at present. So, it’s just about 21 for this fund and it’s as high as 36 for the UTI mid-cap. So, it’s a huge difference there. Another interesting differentiation here for Mirae is that they’re holding about 18-20% in large caps vis-à-vis all the others who have about 1-3%. That’s something which gave me comfort because I’m happy to be invested in mid-cap but I don’t mind a bit of a cushion in the form of large-caps as well. And the allocation to small-cap again is limited at around 10% which is as high as 26%, let’s say, in SBI mid-cap. This is my personal view and the kind of portfolio I would like to invest my money in. Of course, investors have to do their own research. A couple of other points are that, 2019 till now, since it has been launched, I think it has been a difficult time and in a very difficult time, a new fund has actually performed reasonably well. It’s I think the third or the fourth if we see the overall funds. We’ve picked funds which have more than Rs 1000 crore AUM. It has kind of proven, bit of its worth in a very hard time but it has a long way to go and comparisons will be made with the other funds from the fund house, but I think it seems like a decent bet on a risk-adjusted basis as well. One point that I’d like to add that there’s a lot of consciousness about the expense ratios. This has an expense ratio to the debt plan, it’s just 0.37 which is again the lowest because UTI and SBI can actually go about 1% and even Edelweiss has about 0.8. So, in terms of expense ratios also it’s the least as of now, it can change going forward.