Watch out for these Mid-cap funds

Investors looking for capital appreciation have always found solace in Mid-cap stories. With high growth comes higher risk and no investor is assured of rewards commensurate with risks he or she may undertake. How does an investor ensure holding stocks which promise higher growth than bluechip stocks, but at the same time do not make portfolio vulnerable to unjustified  deep cuts that may not be palatable for a long term faithful investor.  The answer may lie in buying and holding on to a Mid-cap equity mutual fund with an impeccable track record. 

Mirae Asset Emerging Bluechip Fund and BNP Paribas Midcap Fund are two funds which may suit long term investors who have an appetite for growth and can withstand an additional volatility.  Mirae fund with an asset size of Rs.1,623 crores and an excellent out-performance track record of over 5 years is an example of a Mid-cap equity oriented fund that allocates maximum weight-age to Mid-cap stocks with higher growth potential, while managing risk to make it affordable for investors. Over a period of 5 years, the fund has delivered 23.65 per cent annualised return beating its peers and its benchmark index Nifty Fee Float Midcap 100. The expense ratio for the fund is on the lower side at 2.40 . The higher fund size may explain the logic behind the lower expense ratio.

The fund smartly follows the growth investment principle and allocates almost 58.39 per cent in mid capitalisation stocks with allocation being at 10.36 per cent in bluechip stocks and 19.67 per cent allocated to large capitalisation stocks. The allocation in Small-cap stocks is at 11.58 per cent. Kotak Mahindra Bank is the top holding in the portfolio followed by IndusInd Bank, HPCL, Exide Industries and Torrent Pharmaceuticals.

For those investors who may seek a balance between growth and value stocks without losing the focus on Mid-cap stocks, BNP Paribas Mid cap fund may provide an ideal solution. The YTD performance is negative at minus 1.16 per cent; while its 5 year CAGR is at a handsome 21.80 per cent. Whereas for 3 years, the performance reflects a CAGR at 30.34 per cent. The total asset size for the fund stands at Rs. 579 crore and the expense ratio for the fund is at 2.62.

This fund allocates 51.33 per cent to Mid-cap stocks with the allocation being at 20.87 for Small-cap stocks. Bluechip stocks weigh only 4.13 per cent in the fund, with IndusInd Bank being the top holding of the fund. Idea cellular, Bharti Airtel, Yes Bank and KPR Mills are the other top holdings of the fund. 

Investors need to decide on a strategy, whether to focus on growth investing; or a blend of growth and value investing. Depending upon the strategy the fund may be chosen for long term investing.