Bandhan Core Equity Fund: Great turnaround story

Bandhan Core Equity Fund, a large and midcap fund, was launched in August 2005 and has an 18 year track record of wealth creation. If you invested Rs 1 lakh in Bandhan Core Equity Fund, formerly known as IDFC Core Equity Fund at the time of its inception, your investment would have grown to Rs 10.61 lakhs (as of 31^st January 2024, source: Advisorkhoj Research). Equity funds have their ups and downs across investment cycles. Bandhan Core Equity Fund under-performed in the years 2019 to 2021, but has made a very strong turnaround in performance since then. This fund is now consistently a top quartile performer for the last few years.

Why invest in large and midcap funds?

• As per SEBI’s mandate, large and midcap funds must invest at least 35% of their assets in large cap stocks (top 100 stocks by market capitalization) and 35% in midcap stocks (next 150 stocks by market capitalization). The balance of 30% can be invested across market cap segments e.g., large, mid or small caps, or other asset classes.


• These funds have significant allocations to large caps stocks. Large cap stocks tend to be less volatile than midcap stocks and provide stability to your portfolio in volatile market conditions.


• Winners rotate across market cap segments (see the chart below). A diversified portfolio of large cap and midcap stocks can produce superior long-term returns, while reducing downside risks in volatile markets.
  
  

  

  Source: National Stock Exchange, Advisorkhoj Research; Period: 01.01.2013 to 31.12.2023. Disclaimer: Past performance may or may be sustained in the future



• Large caps have a heavier tilt towards certain sectors like BFSI, IT, Oil and Gas, FMCG. Large and midcaps provide more balanced exposure to sectors like Capitalgoods,Consumerservices andRealty, where large cap has low or no exposure. These sectors can benefit from India’s consumption driven economic growth, rising per capita income, changing global supply chain landscape (e.g. China+1), Government’s policies e.g. import substitution (Make in India), digitization, infrastructure spending, shift from unorganized to organized sectors etc.


• Large and midcaps offer the sweet spot between large caps and midcaps for wealth creation over long investment tenures. The chart below shows the growth of Rs 10,000 investment in Nifty 100 TRI (large cap), Nifty Large Midcap 250 TRI (large and midcap) and Nifty Midcap 150 TRI (midcap) over the last 10 years.
  
  

  

  Source: National Stock Exchange, Advisorkhoj Research; Period: 01.02.2014 to 31.01.2024. Disclaimer: Past performance may or may not be sustained in the future

About Bandhan Core Equity Fund

Bandhan Core Equity Fund was launched in August 2005 and has Rs 3,723 crores of assets under management (as of 31^st January2024). The expense ratio (TER) of the regular plan of the scheme is 1.91% (as of 31^st January 2024). It is a diversified equity fund with a large-mid cap bias, and the approach is to use small cap judiciously (up to 20%) to create reasonable alpha over the benchmark, Nifty Large Midcap 250 TRI. Given the sizeable mid-small cap exposure, the fund may have a reasonable amount of cash (up to 10%). The fund intends to maintain a 40-70% active share range. The fund intends to invest in High-Growth/ Quality stocks (sectors with higher than nominal GDP growth over the medium term), with a mix of thematic/cyclical and optional & value stocks. The scheme is helmed by industry veteran Manish Gunwani, along with Rahul Agarwal and Ritika Behera.

Fund Philosophy

Portfolio construct

• High Growth/ Quality Investing - Sectors with higher than nominal GDP growth over the medium term e.g. Private Banks, Internet companies, Auto Ancillaries, and NBFCs.


• Thematic / Cyclicals - Power Capex up cycle, Real Estate Consolidation, Commodities reflationary, US generic investing


• Optional / Value Stocks - Holding Companies, Emerging Technologies (EV, Biologics), Corporate actions

Outperformed the benchmark over the last 3 years

Source: National Stock Exchange, Advisorkhoj Research, as of 31^st January 2024. Returns over periods exceeding 1 year are in CAGR. Disclaimer: Past performance may or may not be sustained in the future.

Source: National Stock Exchange, Advisorkhoj Research, as on 31^st January 2024.Disclaimer: Past performance may or may be sustained in the future

Risk Management Framework

• 40 – 70% active share, though most of the time is likely to be above 50%


• 15% deviation from benchmark


• Large Cap allocation >35%, Mid Cap >35%, Small Cap <20%


• Up to 10% cash calls

Current portfolio positioning

• Overweight versus benchmark: Automobiles, Oil and Gas, Metals, Construction, Realty etc.


• Underweight versus benchmark: Financial services, IT, Capital Goods, Chemicals, FMCG etc


• More or less in line with benchmark: Pharma/healthcare, Consumer Durables etc.
  
  

  

  Source: Advisorkhoj Research, as of 31^st January 2024

Rolling Returns and Quartile Performance - Turnaround in performance

The chart shows the rolling returns of the Bandhan Core Equity Fund for 3 year investment tenures across all market conditions over the last 10 years. We have compared the rolling returns of the fund with the large and midcap category average i.e. average of the rolling returns of all the peer funds over the same investment tenures. You can see that the fund had its ups and downs relative to peers. The fund generally outperformed from 2015 to 2018, it went through a period of underperformance. But it was able to turn around its performance and has started outperforming again.

Source: Advisorkhoj Rolling Returns Calculator, as on 31 ^st January 2024

It is important for users to understand that a fund may go through a period of underperformance for several reasons, but it the fund manager follows a sound process and practices discipline in portfolio management, then the fund can always bounce back as evidenced in the performance trajectory of Bandhan Core Equity Fund.

Source: Advisorkhoj Quartile Rankings, as of 31^st January 2024

Who should invest in the Bandhan Core Equity Fund?

• Investors looking for capital appreciation over long investment tenures


• Investors with high-risk appetites


• Investors with minimum 5 year investment tenures


• You can invest in lump sum or SIP depending on your investment needs


• You can also invest in this fund through 6 - 12 months STP from Bandhan Liquid or Bandhan Ultra Short Term Fund if you are concerned about volatility

Investors should consult with their mutual fund distributors or financial advisors if Bandhan Core Equity Fund is suitable for their investment needs.

Performance Highlights

As on 31^st January 2024

Performance of other schemes managed by the fund manager

As on 31^st January 2024

Disclaimer:

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.

The Disclosures of opinions/in house views/strategy incorporated herein is provided solely to enhance the transparency about the investment strategy / theme of the Scheme and should not be treated as endorsement of the views / opinions or as an investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document has been prepared on the basis of information, which is already available in publicly accessible media or developed through analysis of Bandhan Mutual Fund. The information/ views / opinions provided is for informative purpose only and may have ceased to be current by the time it may reach the recipient, which should be taken into account before interpreting this document. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision and the security may or may not continue to form part of the scheme’s portfolio in future. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. The decision of the Investment Manager may not always be profitable; as such decisions are based on the prevailing market conditions and the understanding of the Investment Manager. Actual market movements may vary from the anticipated trends. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alterations to this statement as may be required from time to time. Neither Bandhan Mutual Fund (formerly known as IDFC Mutual Fund)/ Bandhan Mutual Fund Trustee Limited (formerly IDFC AMC Trustee Company Limited) / Bandhan AMC Limited (formerly IDFC Asset Management Company Limited), its Directors or representatives shall be liable for any damages whether direct or indirect, incidental, punitive special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.