Focused funds have 30-stock limit, but these active equity mutual funds also follow concentrated approach: Here's list

Focused funds are a category of equity mutual funds that do not follow any market-cap-based allocation rule. Instead, they are required to invest in up to 30 stocks, with at least 65% of their assets allocated to equity and equity-related instruments.

Other active equity fund categories, such as large-cap, mid-cap and small-cap funds, have specific market-cap allocation requirements, but there is no restriction on the number of stocks they can hold.

These funds generally invest in a larger number of stocks, often exceeding 100 or 200, to diversify their portfolios and spread risk across companies. However, some active equity funds choose to keep their portfolios concentrated despite not being classified as focused funds.

According to a post by Value Research on X, “Some active equity funds choose to keep their portfolios surprisingly concentrated, even without a focused-fund mandate.”

For instance, Quant Large Cap Fund holds just 15 stocks, with its top 10 holdings accounting for 79.2% of its portfolio. This means a substantial portion of the fund’s assets is invested in a relatively small number of companies. Here are 10 active equity mutual funds with 30 or fewer stocks in their portfolios.

These funds follow different investment mandates, but none of these categories prescribes a maximum number of stocks that a scheme can hold.

Quant Large Cap Fund, which currently holds 15 stocks, must invest at least 80% of its assets in large-cap companies. Quant Mid Cap Fund, with 24 stocks, must allocate at least 65% of its holdings to mid-cap companies. Similarly, the Quant Large and Mid Cap Fund, which holds 24 stocks, must maintain a minimum allocation of 35% to each of large-cap and mid-cap stocks.

Samco Flexi Cap Fund and Capitalmind Flexi Cap Fund, with 24 and 30 stocks, respectively, can invest across market capitalisations, but there is no prescribed stock-count limit.

What does concentrated portfolio mean for investors?

A concentrated portfolio means a fund manager allocates a relatively larger share of the fund’s money to fewer companies rather than spreading investments across a wider range of stocks.

This can work in investors’ favour when the fund manager’s stock selections perform well. However, it can also magnify losses if some major holdings underperform.

For instance, when a fund’s top 10 holdings account for nearly 80% of its portfolio, the performance of these companies can have a significant bearing on the fund’s overall returns.

Investors should therefore not assume that a fund offers broad diversification simply because it belongs to a large-cap, mid-cap or flexi-cap category. Before investing, you should examine the number of stocks held, the weight of the top holdings, sector concentration and how frequently the portfolio changes.

Disclaimer: This is purely for educational/informational purposes and should not be taken as any sort of investment advice. Always consult a SEBI-registered advisor before making any investment decisions.