Fund of Fortnight

This is our mutual fund recommendation. Every fortnight, we recommend one open-ended equity diversified fund that has the best potential of returns for the next one year considering its constituents remain the same.

Reason for recommendation
The market at present seems to be changing the trajectory to move upwards and likely to outperform broader markets. Therefore, investing in Large-Cap funds will likely benefit in the near future. We believe Aditya Birla Sun Life Frontline Equity Fund works better in this space. Looking at its trailing returns, it has outperformed its benchmark and peers most of the time. If we analyse its rolling returns against Nifty 100 TRI (benchmark), then it is able to beat its benchmark in the long-term. If we look at the 5-year rolling returns, then this fund has hardly given any negative returns. Moreover, if we look at 7-year rolling returns, then only 8 per cent of the times this fund gave returns less than 10 per cent, while 92 per cent of the times returns were between 10 per cent to 20 per cent. Even from the risk view point, it takes less risk compared to its benchmark and peers. This evident by its lower standard deviation and beta. This makes its risk-adjusted returns more appealing with Sharpe and Sortino ratios being one of the highest in the category. Thing to note here is that, category also includes large-cap index fund and Exchange Traded Funds (ETFs). Speaking about its portfolio, it invests in 74 stocks with highest stock allocation being not more 9 per cent.


 However, this fund does carry some amount of concentration risk as 49 per cent of the assets are allocated to top 10 holdings, while 52 per cent to top three sectors. On sectoral front, this fund is overweight on financial, automobile and construction, while is underweight on technology, energy and consumer staples. Moreover, stocks like ICICI Bank, HDFC Bank, Reliance and L&T forms the part of its top holdings. This fund, however, is suitable for moderately aggressive to aggressive investors. Conservative investors should consider investing in balanced advantage funds.