Mutual Funds Day 24: Focused Funds

When a Fund manager hand-picks a few stocks and groups them by a common thread, it is called focused funds. The regulations say that a fund manager can have a maximum selection of 30 stocks, but it does not specify if he should select from a specific category like Large, Mid, or Small Cap.

The true performance of a fund manager is tested in a focused fund. The outperformance is only possible if the research and analysis of the fund manager are accurate. Over extended periods, this MF could have below-benchmark returns as the fund selection may be concentrated or not diversified. The volatility and swings also will be higher than a diversified MF.

Examples

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