Choose quality over quantity with Bajaj Finserv Large Cap Fund

When it comes to investing, sometimes less is more. That's exactly the philosophy behind the Bajaj Finserv Large Cap Fund.

In a crowded market of large cap funds, Bajaj Finserv Large Cap Fund focuses on quality, not quantity, with a concentrated portfolio of 25-30* meticulously selected companies. This means that unlike funds that remain close to the index and spread themselves across many companies, the Bajaj Finserv Large Cap Fund is extremely selective of the companies it chooses to invest in. Why is it important? Let’s take a look at the two important ideas that set this fund apart: Active Share and Portfolio Concentration.

Portfolio concentration: Quality over quantity

Portfolio concentration refers to the number of stocks held within a fund’s portfolio. Bajaj Finserv Large Cap Fund will typically hold between 25 to 30* stocks, based on the fund manager's high conviction in their potential to perform well. This means that our fund managers have a stronger belief on a few companies that have the potential to generate alpha. This also gives the fund a better chance to beat the index.

Active share: Beating the index

At Bajaj Finserv AMC, we believe, ‘You cannot beat the index if you buy the index.’ This means that if you simply invest in all the stocks that make up a broad market index, your returns will closely mirror the performance of that index. Then, how can you generate alpha?

To strive for relatively better returns than the index in long run, we emphasize the importance of having a high active share in a fund. Active share measures how different is a portfolio from the index.

A high active share indicates that a fund's holdings deviate significantly from the index. Let’s understand this with the help of an illustrative example. For simplification, we have considered only 5 stocks in a portfolio and index.

What this table shows:

Portfolio (%): This tells us how much of the fund's money is invested in each stock.

Index (%): This shows the contribution of the stock to the value of the index.

Difference (%): This shows the difference between the index and the portfolio.

Active share calculation:

To find out how different the fund's choices are compared to the index, we add up all the differences: 25% (from Stock A) + 10% (from Stock B) + 05% (from Stock C) + 30% (from Stock D) + 20% (from Stock E) = 90%

• In our example, the total difference is 90%.
• We divide that by 2 to get 45%. That's our active share number.

What active share means:

The active share number (45% in this case) tells us that this fund's choices are about 45% different from what most other funds are doing that follow the index.

In essence, having a high active share means we are actively managing our portfolio to seek outperformance.

By intentionally focusing on a select group of stocks that have the potential to perform better than the overall market, the Bajaj Finserv Large Cap Fund seeks to deliver optimal long-term results for its investors in the long run. For a detailed scheme information, click here.

There are large cap funds, and then there is the Bajaj Finserv Large Cap Fund. There’s a difference.

*The above investment strategy is based on prevailing market conditions and opportunities available at the time of investment. The Fund Manager reserves the right to change the count of stocks invested based on the SID and the opportunities available at the time of investment done, Position in derivatives will not be considered for the computation of total number of stocks in the portfolio.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.