Look At Long-Term Returns, Risks, Experts Say

Anand Dalmia: So, which is probably one of the most recommended categories these days just given the flexibility and as the name suggests, you can invest any amount of percentages in any of the categories, which is mid, large or small.

Historically as you know, a lot of the current flexi-caps are the funds which were historically multi caps. So, when the new regulation came around saying that every segment, large, mid and small to have 25% minimum and some of the larger funds, they took the mandate of flexi-cap and converted or rechristened their existing, multi-caps to flexi-caps.

HDFC is actually one of those, which was historically a multi cap, now a flexi cap. And if you look at 2022, the reason why probably they did well, for many, many years Prashant Jain kept on talking about his PSU bets, so in between you know, there were two years when everyone said HCFC fund has finally stopped coming because he could see the value in PSU companies, and then 2021 and 2022, once the PSU cycle started turning around, 2022 was a great year for PSUs, that’s probably one of the reasons why the fund performed so well in 2022. Thanks to PSUs.

However, you know the ones that are historically multi-caps and now become flexi caps, we are seeing the problem that Salonee highlighted that 80%, like HDFC has 80% in large cap. Now I want a flexi-cap but 80% of it is still again in large-caps and one of the reasons is, if you have a fund which is Rs 30,000 crore plus and you want to invest in stocks, then you have to have a large exposure to large-caps otherwise how many stocks do you have in your portfolio. So, I think the larger-ones are the ones which will find it difficult to create a lot of alpha.

Sometimes you can go right on your sectors, but if you have a Rs 30-40-50,000 crores flexi-cap fund just like the Kotak or HDFC, for you to get alpha will not be that easy because you need to have an orientation towards the large-caps, whether it is 60%, 70% or 80%, it has to be there.

Now what are our recommendations, I think Parag Parikh is one that everyone likes, and you know, we are a fintech company, so, we believe in the power of technology, and we believe that long-term. As Nasdaq had 30% correction, if there is value somewhere, then it has to be Nasdaq and if I have to invest my own money, I will tend to do it in Nasdaq.

So, we believe that that Parag Parikh has done very well over the last three-four years, while this year it’s not part of the top five, it has done very well and I think their thesis of diversification, thesis of value, thesis of international diversification is something that we really like, and we would recommend that.

The other one that we really love is again, a small one, which is the Quant flexi cap. Quant has done very well across the segments and one of the reasons is I think they can catch the cycle very well. You know, like Adani was missed by probably everyone on the street, every AMC that we know was looking at it but could not catch it, and I think you know Quant was one of them because they look at only data and then they take a call rather than what’s the perception and stuff like that.

So, I think they have been able to catch cycles very well. Their churn ratios are one of the highest, but I don’t know what happens to this fund in a downturn, real downturn, because we did not probably seen it as it is a new fund, but I think they have done exceptionally well across categories in the last few years and we started believing in the thesis that they have, which is using a lot of data to make their decisions and using data exclusively to make the decisions and I think if there were two funds that we need to probably recommend it will be Parag Parikh and Quant in this category.