Why Mutual Fund investors are offloading focussed funds. Experts explain

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₹8,637 crore in June, data released by the Association of Mutual Funds in India (Amfi) showed, while on the other, the large-cap scheme ( ₹2,049 crore) and focused funds ( ₹1,018 crore) were among the few categories which saw net outflows during June 2023. Debt-oriented schemes witnessed net outflow in the same month after witnessing two consecutive months of net inflows. Focused funds, which invest in a maximum of 30 stocks.

are generally believed to provide small investors the benefits. The primary purpose of focused mutual funds is to allocate their holdings across a restricted number of carefully researched equity and debt funds. The returns from these funds are considered to be more volatile.

“There is no fixed mandate for the kind of market cap the fund manager will look for. Although we have seen that the fund manager builds a portfolio around large cap stocks which hover around 55-75% and balances the majority in mid-cap stocks and a very small portion in small cap," said Mukesh Kochar. According to Mukesh Kochar, National Head-Wealth, AUM Capital, The focussed funds' category industry AUM is around 1.08 lakh crore approx.

Last month we saw around 1018 cr net redemption in the category which is around 1% of the total size of the category.  “This category has not been able to generate reasonable alpha consistently over the last few years compared to other categories of funds. So funds are moving from a category that has underperformed to other categories which are performing. Although this kind of inflow or outflow is a regular phenomenon and each category of funds has its own pros & cons," said Mukesh Kochar.