Cafemutual spoke to Rajiv Anand, MD & CEO, Axis MF on the
launch of the Axis Focused 25 Fund, an open ended scheme which aims to generate
long term capital appreciation by investing in the best 25 companies.
Why
have you chosen to launch this fund now when equity is not the flavour?
Indian markets are trading at 12x1-year
forward earnings. Valuations of markets are at cyclical lows and they make a
very attractive entry point into equities for the long term investor.
Axis Focused 25 is a large cap
biased open-ended product designed to run a concentrated portfolio of not more
than 25 stocks. The portfolio shall comprise high conviction ideas in quality
businesses that can generate superior returns over the medium to long term.
We believe that given our strong
fund management capabilities demonstrated in our current fund performances, we
can run such a strategy to generate superior returns across market cycles.
What
is the philosophy behind 25 stocks? Why not a concentrated portfolio, of say
20/30 stocks?
Most of the large cap diversified
portfolios in India would have about 30-40 stocks. Versus this we believe that
a more focused (less diversified) fund strategy with an average 4% investment
will give the fund manager more flexibility to have concentration in stock
ideas (regardless of their index weight) but at the same time force him to
ensure higher conviction.
Wouldn’t
investing in 25 companies pose a concentration risk?
We understand that taking
concentrated bets on stocks has its own risk and hence we would insist
potential investors look at this fund as a longer term (more than 5 years)
investment. At the same time, we do have some risk management processes inbuilt
in the product to avert this. For example, the fund would have minimum 4
sectors and no sector would have a weightage of more than 30%. Plus, the
overall risk would be lower than mid-cap funds as it would invest in larger cap
companies (more than 90% investment in top 200 companies by market cap).
Why
should investors choose a focused fund instead of a diversified equity fund?
Studies conducted by us reveal that
quality companies have generated more superior returns over market cycles. A
diversified fund cannot take concentrated bets on these companies, even if the
fund manager has higher conviction. Due to their inherent nature of being
diversified, he would always have to keep sector/stock weightage relative to
the index. A focused fund gives the fund manager this freedom; to be index as
well sector agnostic and use pure bottom-up stock picking abilities. This pure
alpha generation strategy should add value to a long term investor.
What category of investors is this fund is suited for? What place should this fund occupy in an investor’s portfolio?
Investors with longer term (more
than 5 years) investment horizon should look at this fund to generate higher
returns versus markets. This fund should occupy the medium to long term portion
of his portfolio.
Given
the current state of the market, what is your strategy to make the NFO of this
fund a success?
Investors have been wary of
investing in mutual funds given the sluggish condition of the markets. We
expect our superior fund performance (significant excess returns at lower risk)
demonstrated across all our equity funds over the last two and a half years, to
help generate interest and credibility in the distribution community. To
highlight this and explain the differentiated nature of our fund, we have
planned NFO events with Axis Bank teams, IFAs, etc., across major cities and we
are also meeting various large distributors individually.
What is your distribution strategy?
We would target all our current
channels including Axis Bank, IFAs, distributors and other channel partners.
How
much are you planning to collect from this fund?
Although market forces will determine the exact flows, our target collection for the fund would be around Rs 200 crore-Rs 250 crore.
