|
Fund |
Invesco
Contra Fund |
|
Category |
Contra |
|
AUM (Rs Cr) |
6,010 (As on 31/12/2020) |
|
Fund Manager |
Mr Dhimant
Kothari & Mr Taher
Badshah |
|
Benchmark |
S&P BSE 500
TRI |
What
is a contra fund?
A contra mutual fund is a mutual fund scheme that invests
uses contrarian ideas.
Meaning it invests in sectors and companies that are
currently not in favour.
A contra fund looks for companies that have strong
fundamentals but may currently not be in favour for whatever reason but look
attractive for a long term horizon.
A contra fund should be a part of your mutual fund portfolio
only if it adds something different from other existing schemes but it should not be part of your core portfolio.
What
is Invesco contra fund?
Invesco contra fund is an equity mutual fund that invests
primarily in equity and equity related instruments using contrarian style of
investing.
Launched in 2007, Invesco contra fund is one of the oldest
schemes in the contra/value category.
Most value and contra funds are usually more mid & small
cap biased with a limited exposure to large cap stocks.
This is because with a value and contrarian style of
investing, fund managers are on the lookout for stocks that are undervalued and
currently not in favour.
More often than not these stocks are usually in the mid and
small cap space.
How
Invesco contra fund is different from other value/contra funds?
Unlike other contra and value funds, Invesco contra fund is
more large cap biased.
It usually works more like a flexi cap mutual fund with a
limited exposure to mid and small cap stocks.
Certain value/funds like say the Tata Equity PE fund focus
on the PE ratio of companies, certain funds focus more on the diversity of the
portfolio and then there are some who are more concerned with entering the
stock at the right price and exiting also at the right price.
Value/Contra funds are more concerned with the valuation
rather than the prices.
Invesco contra fund is neither like the above funds, it is
run more like a flexi cap that has a higher exposure to large cap stocks in the
60-75% range approximately.
The remaining allocation is towards mid cap stocks with a
very tiny portion to small cap stocks.
Invesco
contra fund portfolio
Invesco contra fund refrains from momentum investing unlike
other value/contra funds.
Despite being a contra fund, Invesco contra fund in the way
it practically functions applies more of a growth approach rather than a
contrarian or a value approach.
The top ten holdings are all companies who are leaders in
their respective fields.
There is nothing contrarian either in the holdings,
allocation to the holdings or even the sectors so to speak of.
Without knowing the name of the fund these holdings belong
to, it would be difficult to ascertain whether this is a contra fund or a flexi
cap mutual fund.
As on 31st December 2020, Invesco contra fund had
66% invested into pure large cap stocks which is even more than what some flexi
cap mutual funds held.
The top ten holdings make up for almost half the portfolio
which brings into question as to what exactly is contrarian about this fund and
this would be still be a valid question even if the rest of the portfolio were
entirely contrarian picks.
This is because the fund would still be holding 66% into
large cap stocks.
- The fund is overweight on Financial Services, Technology and Energy as compared to its peers.
- Ever since lockdown was gradually lifted, the fears of NPA’s relating to banks also receded.
- This meant financial stocks were back in focus and demand albeit with cautious optimism
- Technology and energy stocks are more of defensive sectors which is true for equity mutual funds of all categories.
Overall in terms of sector too, it is quite a straight
forward approach regarding the top sectors with nothing out of the ordinary.
Is
Invesco Contra fund truly a contra fund?
With most mutual fund schemes, SEBI’s rules regarding how a
particular equity mutual fund scheme should function is quite precise in terms
of capping.
For example a large cap mutual fund needs to invest 80% of
its portfolio into large cap stocks whereas a mid cap and small cap mutual fund
needs to invest a minimum of 65% into mid and small cap stocks respectively.
The thing with contra and value mutual funds is that they
have no one fixed definition, the rules regarding them is very vague.
Meaning they can invest as they like as long as they hold
65% into equities at all times, like flexi cap mutual funds.
After flexi cap mutual funds, they are the least restricted.
Therefore Invesco contra fund is a contra fund more on paper
but in functioning is like any other flexi cap mutual fund.
Is
Contra fund a good investment?
You should be investing in a contra fund only if it satisfies the following conditions:
- It is part of your satellite portfolio with minimum exposure and not part of your core portfolio.
- It is truly a contra fund in its approach and not merely a flexi cap mutual fund in disguise.
- It adds something new to your portfolio which your other schemes do not, cannot.
- You have a minimum horizon of 7 years since contra funds usually perform in cycles and so does the market.
- You have a true understanding of the functioning of the fund and are aware that it is aligned with your goals.
A contra or a value fund should never be your first scheme
when you start investing in mutual funds.
Most investors look for value and contra funds more out of
fear of missing out on a mutual fund scheme rather than truly being aware of whether
these funds are adding anything new to their existing portfolio.
Diversification is more about understanding the functioning
and purpose of a scheme rather than the number of schemes you hold.
Do not invest in such schemes only because you can, invest
cause you know how they work and whether they would work for your goals.
For portfolio enquiries, email us with your doubts at info@themutualfundguide.com
