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FI High Growth Cos: Good choice for those looking for a multi cap fund
Mon, Sep 01, 2014
Source : Jeni Shukla, Citrus Interactive

Franklin India High Growth Companies Fund is a multi-cap equity diversified fund and has been in existence since June 2007. With assets under management of Rs 742 crore as on July 31, 2014, the fund is benchmarked against CNX 500 Index. The objective is to achieve capital appreciation through investments in Indian companies/sectors with high growth rates or potential.

Performance

The fund’s performance across different time horizons is extremely good as seen in the table given below. Its performance since inception has done better that its benchmark by over five percentage points in CAGR terms. In the time horizon of 3 and 5 years it has clearly been in the top quartile of its peer-set, and in 1 year it is in the second quartile of the peer-set. The outperformance margin vis-à-vis its benchmark as well as equity diversified category is substantially high. 

 

YTD

1 Year

3 Years

5 Years

Since Inception

Franklin India High Growth Cos Fund

40.02

66.92

23.25

18.91

11.99

CNX 500 Index

24.47

43.93

13.66

10.89

6.79

Category Average

31.41

57.69

16.97

15.24

NA

Rank

29/146

45/145

15/137

24/120

NA

  Figures are in % as on August 31, 2014; Returns above 1-year in  Compounded Annual Growth Rate (CAGR)

When we look at the calendar year returns it’s quite clear that this fund has beaten its benchmark in each of the last calendar five years. It has beaten the category average in 2009, 2012 and 2013 – the underperformance in 2011 being marginal.

 

2009

2010

2011

2012

2013

Franklin India High Growth Cos Fund(G)

98.63

14.79

-24.97

42.54

9.22

CNX 500 Index

88.57

14.13

-27.19

31.34

3.61

Category Average

87.69

19.18

-24.09

34.4

4.73

Rank

37/120

98/128

83/135

27/139

21/143

  All figures in %

Risk. In terms of measures of risk such as standard deviation and beta (measured over last three years), the fund has taken lower risk compared to the category.

 

Standard Deviation

Beta

Franklin India High Growth Cos Fund(G)

0.89

0.73

Category Median

0.95

0.83

 

Risk-adjusted Returns. In terms of measures of risk such as Treynor ratio and Sharpe ratio (measured over last three years) the fund has delivered higher return for risks undertaken in the portfolio vis-à-vis its category median.

 

Treynor Ratio

Sharpe Ratio

Franklin India High Growth Cos Fund(G)

0.09

0.08

Category Median

0.06

0.05

 

The fund has an expense ratio of 2.63 per cent. This is 9 basis points higher than the median for the diversified-equity category (2.54 per cent). It has an exit load of 1% if investors move before 365 days, this is in line with the general equity diversified funds. 

Sector concentration. The fund’s concentration in the top three, five and ten sectors is higher than the median for the diversified-equity category.

 

Top 3

Top 5

Top 10

Franklin India High Growth Cos Fund(G)

47.07

59.57

77.03

Median - Equity Diversified

36.53

48.6

67.86

 

Company concentration. The fund’s concentration is lower than the median for the diversified-equity category in the top three and five sectors. However, the concentration to the top 10 companies is higher than the category median.

 

Top 3

Top 5

Top 10

Franklin India High Growth Cos Fund(G)

16.5

25.18

44.2

Median - Equity Diversified

17.02

25.37

42.93

 

Processes

The objective as per the offer document is to invest in companies having ‘above average’ potential for growth. The fund has a mandate of having a minimum of 70% investment in equity and equity linked instruments. The investment strategy is a mix of top-down and bottom-up.

The fund manager is the primary decision maker in matters related to the selection of securities, timing, weightage of individual securities and asset allocation within the parameters laid out by the Chief Investment Officer. The Investment committee which is an informal group comprising of International CIO, CIO, Head – Risk Management and Portfolio Managers interacts regularly for a review of performance.

 

Portfolio

The fund has investment of 88% in equities, 9% in call money and 3% in Tata Motors Differential Voting Rights (DVR). The fund has maintained an average of 91% in equity holdings, 7% in call money and 2% in Tata Motors DVR in the last 12 months. The fund currently has 32 stocks in its portfolio which is lower than the category median of 47 stocks. The stock count has reduced from an average of 51 in 2009 to 36 in 2013. 51 stocks have been bought and sold in the last 1 year. Of these 17 scrips have been part of the portfolio in each of the last 12 months.

In terms of market capitalisation the fund has 56% of the fund assets are invested in large cap stocks and 33% in mid and small cap stocks.

Currently, 55% of the portfolio is invested in cyclical stocks, 22% in service stocks and 12% in defensive stocks. The fund has a very high exposure to Banks (27%), followed by Software (16%), Pharmaceuticals (9%), Cement (7%) and Industrial Products (5%). Most of the bank holdings are in the private sector. ICICI Bank has been its largest holding in the last one year. Currently the fund’s exposure to ICICI Bank is 6%, followed by Axis Bank (5%), Tech Mahindra (5%), TCS (5%) and Cipla (4%) – the top 5 holdings constituting 25% of the portfolio.

Fund Manager

There are two fund managers for this fund R Janakiraman and Roshi Jain.

R Janakiraman is the Fund Manager. He is a B.E and PGDM (Business Management). He manages several other funds such as Franklin India Flexi Cap, Franklin India Prima Plus Fund, Franklin India Smaller Companies Fund, Franklin India Prima Fund, & Franklin India Opportunities Fund. These funds have a good track record which speaks positively about the fund manager’s skills.

Roshi Jain is the Vice-President & Portfolio Manager. Ms. Jain is a CFA, ACA and PGDM from IIM-Ahmedabad.

Ms. Jain has been a research analyst at Franklin Templeton responsible for providing research support on the Indian capital goods and infrastructure sectors for 7 years. Ms. Jain has been in the investment Industry for the past 10 years. Prior to joining Franklin Templeton, she worked as a Financial Analyst at Goldman Sachs, London. She is also fund manager for Franklin Asian Equity Fund, Franklin Build India Fund, FT India Feeder - Franklin US Opportunities Fund, Franklin India Flexi Cap Fund, Franklin India Prima Fund & Franklin India Smaller Companies Fund.


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The fund has a very good track record. It may show some volatility in shorter time horizons because of high sector concentration but may do well over longer periods. It can be considered by investors looking for a flexi cap approach to long term investments.

 

 
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