PGIM Diversified Equity Fund Review



PGIM Diversified Equity Fund


Flexi Cap

AUM (Rs Cr)

556  (As on 31/01/2021)

Fund Manager

Mr Aniruddha Naha


Nifty 500 TRI


What is PGIM Diversified Equity Fund?

PGIM Diversified Equity Fund is a flexi cap mutual fund.

From January 2021 onwards, it is known as PGIM Flexi cap fund.

It has gained prominence and attention in recent times due to its stellar performance and being able to outperform even other well-known funds in its category.

It is important to dissect and understand the reasons for its out performance rather than investing in it purely on the basis of recent high returns.


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What is diversified equity mutual fund?

A diversified equity mutual fund is one which invests across various caps and sectors and industries.

It is not restricted in any of the above sense.

Prime examples include:

  1. Flexi cap mutual fund
  2. Multi cap mutual fund
  3. Large & mid cap mutual fund and
  4. ELSS/Tax saving mutual funds.

These funds take exposure throughout the market and therefore are well diversified.

Thematic and Sectoral mutual funds are not diversified mutual funds since they are restricted within the theme and sectors.


What is a Flexi cap fund?

A flexi cap mutual fund is one which does not have restriction with regards to caps or sectors or themes or number of stocks it can hold.

It needs to be invested 65% into domestic equities at all times though.

The remaining can be either invested in international equity, domestic equity, cash or debt as per the liking of the fund manager.

Due to less restrictions on compared to other equity mutual funds, a flexi cap fund is very well diversified.

Additional reading: Click Here to read about the various types of equity mutual funds 

What is the difference between multi cap and diversified fund?

In reality there is not much difference between the two.

A multi cap fund needs to abide by the following rules:

  1. Minimum 25% in large cap stocks
  2. Minimum 25% in mid cap stocks
  3. Minimum 25% in small cap stocks

A diversified fund on the other hand has no such restriction with regards to minimum allocation but can move across caps and sectors as it wishes to.


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PGIM Diversified Equity Fund Strategy

The fund in the recent past has gravitated more towards ignored sectors and caps.

This has meant a larger exposure and share towards even mid cap and small cap stocks which are otherwise seen as aggressive.

Being a small fund house with lower AUM has meant that liquidity did not become an issue.

Of course, this strategy could only work with stocks which were fundamentally strong to begin with and were not picked merely since they were ignored.

There is no guarantee nor any compulsion for the fund to continue with this strategy.

Additional reading: Click Here to read our complete review of Motilal Oswal Multicap 35 fund 

PGIM Diversified Equity Fund Portfolio

PGIM Diversified Equity Fund has historically been an aggressive fund compared to its peers.

Most multi cap funds in the past would be more large cap tilted with minimal exposure to mid and small cap stocks.

On the contrary PGIM Diversified Equity Fund had more or less equal allocation to large caps and mid and small cap stocks.

Same was the case with its picks across sectors and themes to the point of almost functioning as a value fund.

Therefore it was surprising that with the new multi cap rules coming into effect from February 2021, the fund decided to convert itself to a flexi cap mutual fund rather than staying on as a multi cap fund.

This could signal a shift in its strategy, something only which time can prove.

Expecting the fund to function and perform like it has been doing earlier would be naïve and silly.


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As can be seen by the above image, the fund has always been more tilted towards mid and small cap stocks as compared to its peers.

This was even the case prior to the bull rally seen from the second half of 2020.

So one cannot attribute the higher exposure to mid and small cap stocks as a result of the bull rally.

Anyone who would have invested prior to the rally would have made handsome gains considering the higher exposure to mid and small cap stocks and the potential that these caps hold.

Unfortunately, that is not how an average retail investor thinks, most investments and aum in a particular fund is after it has performed rather than seeing and understanding its potential before investing.


The fund is overweight on

  1. Technology
  2. Engineering and
  3. Chemicals

While it is under weight on

  1. Financials
  2. Construction and
  3. Energy

Each fund in a category will have varying degrees of exposure to a particular sector which should not be surprising.

The surprising part with PGIM Diversified Equity Fund is the level of difference in sectors it is overweight on and under weight on.

It is more or less a multi cap fund in the flexi cap category that is functioning as a value fund.

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Reason for recent performance

As mentioned earlier, the fund has historically taken higher exposure to mid and small cap stocks.

This was the case even prior to the rally in these two caps.

Mid and small cap stocks were largely ignored by most mutual funds since they were lagging in returns for quite sometime prior to the bull rally in the second half of 2020.

Most returns prior to that were concentrated in a few stocks.

The fund was able to pick most of these mid and small cap stocks at attractive prices when most other multi cap funds had ignored them.

When the rally took place, the fund benefitted from the massive spike in prices of mid and small cap stocks.

This is what led to the fund leaving behind other funds in its category by a huge margin.


       It will be interesting to observe what path the fund chooses going forward, whether it decides to stick with its current strategy or move towards newer pastures.

   The fund is small in aum which provides it with more flexibility but then again it has decided to convert itself to a flexi cap fund rather than staying on as a multi cap fund.


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Disclaimer : While due precaution has been undertaken in the preparation of this article, The Mutual Fund Guide or any of its authors will not be held liable for any investments based on the above article. The above article should not be considered financial advice and has been published only for your perusal. Due credit has been given in case wherever required, in case you feel any part violates any rights then do get in touch with us and we shall get it duly removed.  
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