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Kotak Select Focus: Top down strategy pays off
Sun, Jan 22, 2017
Source : Yash Jashnani, Citrus Interactive

Kotak Select Focus Fund is an open ended large cap equity diversified fund. The objective of the scheme is to generate long-term capital appreciation from a portfolio of equity and equity related securities, generally focused on a few selected sectors.  The fund has an AUM of Rs. 7,181 Crore as on 31st December 2016, which has increased by Rs 3,233 crore compared to last year as on 31st December 2015. There is 1% exit load for redemption or switch outs within one year from the date of allotment of units, irrespective of the amount of investment. No exit load for redemptions or switch outs after 1 year from the date of allotment of units, irrespective of the amount of investment

Performance

The fund’s performance across various time horizons is extremely good as seen in the table given below. It has beaten its benchmark in all the time periods. It has also beaten the category average in all the time periods.

Scheme Name

YTD

6 Months

1 Year

3 Years

5 Years

Since Inception

Kotak Select Focus Fund

9.44

2.56

9.44

21.17

20.27

13.36

 NIFTY 200

3.7

-0.03

3.7

11.3

13.63

7.95

Category Average

4.75

1.06

4.75

18.65

18.76

NA

Rank

28/147

38/147

28/147

40/133

42/128

NA

Figures are in % as on 31st December 2016; Returns above 1 year in Compounded Annual Growth Rate (CAGR)

 In terms of the calendar year returns the fund has beaten its benchmark in all time periods. It has beaten the equity diversified category in all time periods except in the year 2012 & 2015 as shown in the table below.

Scheme Name

2012

2013

2014

2015

2016

Kotak Select Focus Fund

33.45

6.13

57.87

2.96

9.44

 NIFTY 200

31.64

4.44

35.53

-1.9

3.7

Category Average

34.3

5.32

54.63

3.86

4.75

Rank

58/128

61/131

45/133

76/140

28/147

All figures in % as on 31st December 2016

 

Risk: In terms of measures of risk such as standard deviation the fund has taken higher risk as compared to its category median and in terms of measures of risk such as Beta (measured over the last 3 years), the risk taken by the fund is lower as compared to the category median.

 

Standard Deviation

Beta

Kotak Select Focus Fund

0.93

0.92

Category Median

0.9

0.93

 

Risk-Adjusted Return: In terms of Treynor & Sharpe ratio (measured over the last 3 years) the fund has proved higher risk-adjusted returns than the category median.

 

 

Treynor

Sharpe

Kotak Select Focus Fund

0.07

0.08

Category Median

0.05

0.06

 

Portfolio

Sector concentration: The fund’s concentration in the top 3, 5 and 10 sectors is higher compared to its category median.

 

 

Top 3

Top 5

Top 10

Kotak Select Focus Fund

34.09

46.84

65.37

Category Median

33.63

45.57

64.95

All figures in % as on 31st December 2016

 

Company concentration: The Fund’s Concentration in the top 3, 5 and 10 companies is lower than the category median.

         

 

Top 3

Top 5

Top 10

Kotak Select Focus Fund

14.7

22.19

37.52

Category Median

16.41

24.24

39.52

 All figures in % as on 31st December 2016


Number of Equity Holdings: The Fund currently holds 52 stocks in its portfolio (31st December 2016), which is higher than the median stock count of the equity diversified category, which currently stands at 46. In the last 5 years the equity holding averages to 51.08.

 

Cash Equivalent:        

Its cash equivalent for December was 6.8 per cent. The average cash allocation for the last five years is 4.02 per cent. Its maximum allocation to cash over the last two years is 9.70 percent in February 2016 and lowest was -0.40 percent in August 2014. In 2016 it had an average cash allocation of 5.72 per cent.

 

Portfolio Characteristics:

The Top 5 sectors include Bank-Private, Cement & Construction, Refineries, Industrial Gases & Fuels and Automobiles – Passenger Cars.

In the last 6 months the fund has bought stocks of Advanced Enzyme Technologies Ltd., GAIL (India) Ltd., ICICI Prudential Life Insurance Company Ltd., Laurus Labs Ltd., Max India Ltd. and RBL Bank Ltd.

Stocks of CESC Ltd. & Tech Mahindra Ltd. have been dropped from the portfolio. The fund also bought and sold the stocks of Zee Entertainment Enterprises Ltd.

 

Process

The scheme would invest 65-100% in Equity & Equity Related Securities, the scheme would also invest 0-35% in Debt and Money Market Securities.  The investment in securitized debt shall not exceed 50% of the debt and money market instruments.

To achieve the investment objective, the scheme will invest in equity and equity linked instruments across companies irrespective of their market capitalisations. However, the Fund Manager will generally invest in a few selected sectors, which in the opinion of the fund manager have potential to grow. To that extent it would be a concentrated strategy but managed actively. Moreover there will not be any restrictions in terms of investment in a single sector or cap on floor of investment per sector. There will be concentration in the portfolio on certain select sectors, which are in the opinion of the fund manager expected to do well.

Fund Manager

Harsha Upadhyaya

Mr. Upadhyaya, CFA serves as the Chief Investment Officer of Equity and Fund Manager at Kotak Mahindra Asset Management Company Limited. He joined the fund house in August 2012. Mr. Upadhyaya has 18 years of experience spread over equity research and fund management.

He served as Senior Vice President and Portfolio Manager of DSP BlackRock Investment Managers Pvt. Ltd. He previously served as a Senior Vice President and Head of Equity at Kotak Mahindra Asset Management Company Limited. He served as Vice President and Fund Manager of Equities at UTI Asset Management Company (P) Ltd. until July 21, 2011. His prior stints have been with companies such as DSP BlackRock, UTI Asset Management, Reliance Group, and SG Asia Securities.

Mr. Upadhyaya has received the CFA charter from the CFA Institute. He received a PGDM in Finance from the Indian Institute of Management, Lucknow in 1996. Mr. Upadhyaya also earned a Bachelor of Engineering in Mechanical Engineering from the National Institute of Technology, Suratkal in 1993.

 

Our View

Kotak Select Focus has demonstrated good performance across time periods. As the name suggests, takes concentrated high conviction bets. This strategy makes the fund a bit aggressive. The fund manager has a good track record. It can be considered for a large cap oriented fund to be picked for your portfolio.

 

 
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