Bandhan Core Equity Fund: Strong turnaround in performance

Bandhan Core Equity Fund, formerly known as IDFC Core Equity Fund is a large and midcap fund. As per SEBI’s mandate, Large and midcap funds must invest minimum 35% of their assets in large cap stocks (top 100 stocks by market capitalization) and 35% of their assets in midcap stocks (next 150 stocks by market capitalization). The balance 30% can be invested across market cap segments e.g. large, mid or small caps, or other asset classes. The fund has an 18 year vintage and has made a strong turnaround in performance in the last 2 years or so. In the last 1 year, Bandhan Core Equity Fund is one of the best performing large and midcap funds.

Why invest in large and midcap funds?

• Large and midcap funds investment in a much broader universe of stocks compared to large cap funds. Midcap stocks have leadership presence in sectors, where large caps have limited presence.


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


• The midcap component of these funds has the potential to create alphas over long investment horizons. The chart below shows the growth of Rs 10,000 investment in Nifty Large and Midcap 250 TRI versus the Nifty 50 TRI over the last 10 years. You can see that the Nifty Large Midcap 250 TRIwas able to create more wealth.

Source: National Stock Exchange, Advisorkhoj Research, as on 31^st October 2023.

About Bandhan Core Equity Fund

Bandhan Core Equity Fund was launched in August 2005 and has Rs 2,890 crores of assets under management (as on 31^st October 2023). The expense ratio of the scheme (TER) is 1.96% (as on 31^st October 2023). 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/ cyclicals and optional & value stocks.

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, 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

Outperformance in recent times

Source: National Stock Exchange, Advisorkhoj Research, as on 31^st October 2023.

Source: National Stock Exchange, Advisorkhoj Research, as on 31^st October 2023.

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

• Financials (overweight): The sector currently offers growth at a reasonable price. Valuations are reasonable across Banks/ NBFCs, and the credit growth cycle also remains in the mid-cycle stage leading to our positive bias. Selective non-lending financials are attractive too.


• Information Technology (underweight): US economy headwinds continue for the sector as we see a deceleration in most of the IT major's growth trajectory. The rise of global captive centres also increases the risk on the medium to long-term growth trajectory. We remain cautious in the sector due to these risks.


• Auto (more or less in line with benchmark): Rural/mass consumption revival and the festive season should support passenger auto volumes. Given global uncertainties, the fund manager is cautious about the companies exposed to the global auto cycle.

Source: Advisorkhoj Research, as on 31^st October 2023

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 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 October 2023

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 on 31^st October 2023

Who should invest in 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.

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.