SBI Focused Equity Fund as the name suggests is a focused fund that can invest in not more than 30 stocks at any given time.
It was initially launched as a Small & Mid cap fund by
the name of SBI Emerging Businesses Fund but was later renamed as SBI Focused
Equity Fund and re-categorized as a focused fund due to SEBI’s
re-categorization exercise in 2018.
Ever since its re-categorization the fund has seen a heavy
tilt to large cap stocks which is a departure from its earlier investing
stance.
|
Fund |
SBI Focused Equity Fund |
|
Category |
Focused |
|
AUM (Rs Cr) |
38,610 (As on 30/06/2025) |
|
Fund Manager |
Mr R Srinivasan |
|
Benchmark |
BSE 500 TRI |
Features of SBI
Focused Equity Fund
Although a focused fund on paper, the strategy of the fund
with regards to the category allocation swings between a flexi cap and a large
& mid cap one.
This can be further attested by the sector allocation since
the beginning of the year
The fund has a highly concentrated portfolio with
historically negligible allocation towards small cap stocks.
It also takes exposure to foreign stocks but it has been
limited to only two stocks in the recent past, namely:
- Alphabet Inc.
- Epam Systems Inc.
Both the foreign holdings belong to the technology sector
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Is it good to invest in a Focused equity fund?
Focused mutual funds have a concentrated portfolio and do
not invest in more than 30 stocks.
There are less diversified than flexi cap mutual funds but
also have more potential for higher returns.
Despite the limitation of 30 stocks, certain focused mutual
funds invest in even fewer stocks than that.
Invesco Focused fund invests in only 20 stocks whereas Axis
Focused fund invests in only 25 stocks.
Funds besides focused funds also at times apply this
investment strategy even though there are under no obligation to.
Advantages of a
focused fund
High returns
A focused fund means a highly concentrated portfolio.
So if suppose the concentrated list of stocks go on an
upswing, there are chances of higher returns say opposed to a flexi cap mutual
fund which is far more diversified.
Disadvantages of a
focused fund
Highly volatile
The other side of having a highly concentrated portfolio is
opening itself to the risk of the calls of the fund manager not going according
to plan.
Therefore there is little cushion in such a case since a focused
fund does not have the flexibility of a flexi cap mutual fund.
Higher dependency on the fund manager
A focused fund can at maximum keep 30 stocks, in certain
cases even lower.
Since it is a highly concentrated portfolio, the role of the
fund manager in stock picking becomes all the more important.
Compared to other diversified categories, the role of a fund
manager has higher significance since it requires a more hands on approach.
Click here to read about the comparison between focused and flexi cap mutual funds
SBI Focused Equity
Fund Portfolio
SBI Focused Equity Fund is one of the few focused mutual
fund schemes to have international exposure
in the form of Alphabet Inc & Epam Systems Inc.
The exposure is substantial with the two stocks accounting
for close to 10% of the total portfolio and both finding a place in the top 10
stock holdings.
The fund is very similar to a flexicap fund with respect to
its allocation.
We have considered the top 5 flexicap funds in terms of AUM
and compared it with SBI Focused Equity Fund with regards to how the funds
allocate their top ten holdings.
|
Scheme |
Top 10 holdings % |
|
HDFC Flexi Cap |
51.49 |
|
Parag Parikh Flexi Cap |
50.82 |
|
UTI Flexi Cap |
44.18 |
|
Aditya Birla Flexi Cap |
36.54 |
|
Kotak Flexi Cap |
44.36 |
|
SBI Focused Equity Fund |
44.99 |
On face value the difference seems negligible but further
inspection dispels that theory.
This can be better understood when you compare where the
rest of the portfolio (not including the top 10 stocks) in terms of number of stocks is distributed in.
|
Scheme |
No of stocks |
|
HDFC Flexi Cap |
41 |
|
Parag Parikh Flexi Cap |
77 |
|
UTI Flexi Cap |
47 |
|
Aditya Birla Flexi Cap |
69 |
|
Kotak Flexi Cap |
47 |
|
SBI Focused Equity Fund |
16 |
As can be seen SBI Focused Equity Fund has a very focused
portfolio which should not be surprsinig.
The comparison seems unfair since the rest of the schemes
are flexicap funds and not focused funds which is a fair point but the reason
in doing so is to counter the theory that it can be considered as a flexicap
fund.
A focused fund is heavily depended on the fund manager
compared to most other mutual fund schemes, this is merely an observation and
not necessarily a negative or positive commentary on it.
As can be ascertained by now, it is fair to say that SBI
Focused Equity Fund can be viewed as a flexicap scheme in terms of category
allocation but definitely not in terms of portfolio distribution.
The distinction between the two is significant, gold and
silver are both commodities but definitely not the same.
Is SBI Focused Equity
Fund good for long term?
The fund as previously mentioned is a focused fund so it is
restricted with regards to the number of holdings.
At any given time it cannot hold more than 30 stocks.
One of the major motivation for investors to consider this
fund is the fact that the fund manager of SBI Small Cap Fund is also the one at
the helm of SBI Focused Equity Fund, that is Mr. R. Srinivasan.
However this is a futile exercise since both funds are
vastly different in every sense, SBI small cap fund needs a minimum of 65%
allocation towards small cap stocks whereas this is no such restriction for SBI
Focused Equity Fund.
On the other hand SBI Focused Equity Fund cannot have more
than 30 holdings but the same is not true for SBI Small Cap Fund.
The success of one fund cannot be seen as a strong indicator
of future success of the other since the two funds cannot be compared.
Post SEBI’s re-categorization exercise the fund functions
more like a flexi cap fund while being large cap biased along with a focused
strategy.
In a world which already has flexi cap funds which are far
more diverse, why would you consider a focused fund with a large cap approach
while being constrained?
There are enough options elsewhere and the fund does not
justify its presence in a long term mutual fund portfolio.
Or else it would be akin to settling for a subset when the
whole is very easily available.
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