Invesco India Growth Opportunities Fund: Aiming To Perform Consistently Across All Market Conditions - Outside View by PersonalFN

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Invesco India Growth Opportunities Fund: Aiming To Perform Consistently Across All Market Conditions
Jun 29, 2020

Market ups and downs are an integral part of equity investment. Some funds, however, efficiently manage their portfolio regardless of market movement to reward their investors with superior risk-adjusted returns. Such funds have the potential to benefit from market rallies and limit the downside during market downturns, thus helping to create long-term wealth.

Investing in a diversified portfolio of stocks and sectors with solid growth potential is an important step in creating an all-weather portfolio. Currently, stocks across market capitalisation are beaten down due to the COVID-19 impact. However, from a long term perspective equity investment, especially in the large and mid cap segment is still attractive based on risk-return parameters.

Invesco India Growth Opportunities Fund (IIGOF) is one such fund that invests in a diverse portfolio of large & mid cap stocks with an aim to perform consistently across all market conditions.

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Graph 1: Growth of Rs 10,000 if invested in Invesco India Growth Opportunities Fund 5 years ago

Aiming to generate decent alpha over the benchmark, IIGOF majorly focuses on growth, along with some diversification to value. The funds earlier track record was quite ordinary to give it an advantage over its peers. Nonetheless, over the past couple of years, IIGOF has shown significant improvement in its performance. With a growth of about 7.5% CAGR, an investment of Rs 10,000 in the fund, five years back, would have grown to about Rs 14,352. A similar investment in its benchmark, S&P BSE 250 LargeMidcap 65:35 - TRI Index would have been valued at about Rs 13,477 (at 6.2% CAGR). It is noteworthy that the fund has stood strong in the current corrective phase when many of its peers failed to catch up with the benchmark.

Table: Invesco India Growth Opportunities Fund's performance vis-a-vis category peers
Scheme Name Corpus (Cr.) 1 Year (%) 2 Year (%) 3 Year (%) 5 Year (%) 7 Year (%) Std Dev Sharpe
Mirae Asset Emerging Bluechip 8,808 -2.99 3.89 5.19 12.53 23.56 21.72 0
Invesco India Growth Opp Fund 2,285 -6.78 -1.67 4.82 7.49 14.92 20.12 0
Edelweiss Large & Mid Cap Fund 438 -7.95 -1.82 3.48 5.98 12.93 19.61 -0.02
Tata Large & Mid Cap Fund 1,397 -7.08 1.67 3.27 6.8 13.84 20.29 -0.02
Kotak Equity Opp Fund 3,009 -4.3 1.29 3.2 8.06 15.02 20.71 -0.02
Canara Rob Emerg Equities Fund 4,788 -4.75 -1.68 2.72 9.7 22.32 21.22 -0.03
LIC MF Large & Midcap Fund 587 -5.11 -0.6 2.55 8.28 NA 20.02 -0.04
Sundaram Large and Mid Cap Fund 1,025 -11.52 -3.29 2.53 6.78 14.07 22.09 -0.02
Quant Large & Mid Cap Fund 4 6.67 3.04 2.43 9.46 18.21 19.57 -0.05
DSP Equity Opportunities Fund 4,343 -5.68 -1.06 2.34 7.9 14.54 21.57 -0.04
S&P BSE 200 - TRI   -8.16 -3.32 2.04 6.14 12.43 21.54 -0.04
Returns are point to point and in %, calculated using Direct Plan - Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on June 24, 2020
(Source: ACE MF)

*Please note, this table only represents the best performing funds based solely on past returns and is NOT a recommendation. Mutual Fundinvestments are subject to market risks. Read all scheme related documents carefully. Past performance is not an indicator for futurereturns. The percentage returns shown are only for indicative purposes.

Over the last couple of years, IIGOF has showcased a remarkable performance and has outperformed many of its category peers. The fund has outperformed its benchmark S&P BSE 250 LargeMicap 65:35 - TRI and category average by a noticeable margin of 2 percentage points over the longer time horizon of 3-year and 5-year period. Even during shorter period of 1 year, the fund has been ahead of the benchmark and many of the category peers with a decent margin.

On risk-return parameters, IIGOF has been noteworthy. With a Standard Deviation of about 20.12, the fund's volatility has been well below the benchmark (21.54) as well as the category average. It commands a superior Sharpe, which is currently the highest in the category. IIGOF has compensated its investors well for the level of risk taken.

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Investment strategy of Invesco India Growth Opportunities Fund

Classified under large and midcap funds category, IIGOF is mandated to invest at least 35% of its assets in large caps along with at least 35% in midcaps. The fund maintains a large cap bias where it holds 55% to 60% of its assets and maintains about 35% allocation into mid-caps. The fund follows a process-based investment strategy and strictly adheres to its mandate and investment philosophy.

The fund house has positioned IIGOF as a growth oriented fund that will maintain a minimum 75% of its portfolio exposure in growth and remaining into value. While picking stocks, the fund looks out for stocks of companies with high growth potential. It follows bottom up and top down approach to stock picking with no style bias.

Graph 2: Top portfolio holdings in Invesco India Growth Opportunities Fund

IIGOF usually holds a well-diversified portfolio of about 40 to 45 stocks. As on May 31, 2020, the fund held 41 stocks in its portfolio, with the top 10 stocks together accounting for about 45.2% of the total assets. HDFC Bank, Reliance Industries, HDFC Ltd., TCS, ICICI Bank, and Bharti Airtel currently appear among the top holdings in the fund's portfolio.

Stocks like Bharti Airtel, Indraprastha Gas, Ajanta Pharma, Whirlpool of India, Reliance Industries, etc. contribute the most to the fund's gains in the last one year, while stocks like HDFC Bank, ICICI Bank, Aditya Birla Fashion and Retail, among others eroded some of its value.

IIGOF's portfolio is diversified across a host of cyclical and defensive sectors. The fund holds its top exposure in Banks, currently accounting for around 16.6% of its assets. It holds another 8.1% in finance stocks. Consumption, Infotech, Petroleum and Pharma are the other prominent sectors in the fund's holdings.

Suitability

IIGOF has a decent track record of timely identifying fundamentally sound stocks across market cap segment which has helped it stand out among the list of top performers in its category. The fund has been quick enough to identify sector trends and position the portfolio to benefit from upcoming opportunities. Both the fund managers, Mr Taher Badshah and Mr Amit Ganatra, have adopted the fund well and have maintained its performance track record.

However, its performance may at times be in contrast to its peers that hold significant exposure to mid-caps. The fund is suitable for investors with high risk appetite and an investment horizon of at least 5 years.

Editor's note: The last few years have not been among the best for equity mutual funds. While most funds have underperformed or are struggling to match the returns of the benchmark, there are few funds that have the potential to constantly generate alpha for its investors. And we have identified five such high alpha generating funds, in our latest report 'The Alpha Funds Report 2020'. Do not miss our latest research finding. Get your access to this exclusive report, right here!

Note: This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

Author: Divya Grover

This article first appeared on PersonalFN here.

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PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.

Disclaimer:

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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