What are Mid Cap Mutual Funds?
Mid Cap mutual funds invest at least 65% of their investment corpus in companies with medium market capitalisation. Companies between 5000 Cr to 20000 Cr market cap are usually considered mid cap companies. According to SEBI, companies ranked from 101 to 250 in terms of market capitalization are mid cap companies.
Who should invest in mid cap mutual funds?
Ideally, every investor must have some exposure to the size factor i.e. mid and small cap funds. There is enough research, first pioneered by Fama & Fench, that has proved that the size factor considerably outperforms the rest of the market. However, ensure you choose a fund with a defined investment process and a consistent track record. For details read, ‘How to choose equity mutual funds?’
Like all equity products, mid cap mutual funds should be invested in with a long term view, usually 7-10 years. Ensure that mid and small cap funds together are less than 25% of your total portfolio.
For details read, ‘How to achieve the right diversification in Mutual Funds?’
Why does growth & size strategy work?
Return premium exists for investing in the growth and capitalization of stocks. Mid/Small size companies are relatively less discovered and priced inefficiently; this gives enough room for outperformance in this sub-segment. Growth in such companies is usually higher than large cap peers. Research suggests, investing in smaller sized companies yields higher returns than large cap companies over the long term.
Top 10 Mid cap funds 2021 based on 5-year rolling returns
|Fund Name||Q||P||Returns Since inception||5 Year Rolling Return (%)|
|HDFC Mid-Cap Opportunities Fund||
|Axis Midcap Fund||
|DSP Midcap Fund||
|L&T Midcap Fund||
|UTI Mid Cap Fund||
|Franklin India Prima Fund||
|Sundaram Mid Cap Fund||
|Kotak Emerging Equity Fund||
|Tata Mid Cap Growth Fund||
|BNP Paribas Mid Cap Fund||
Q – Quality; P – Performance (*for the complete & updated list click here)
1. HDFC Mid-Cap Opportunities Fund:
The fund follows the bottom-up approach to identify high-quality growth businesses for the long term. Being the most popular fund in the midcap category, the fund’s asset size is the largest as compared to its peers, which results in the fund investing almost 49% of its portfolio into large cap stocks and only about 37% in mid cap stocks. The fund might soon evolve to Large & Mid cap fund.
2. Axis Midcap Fund:
The fund has higher exposure to larger midcap companies with have high growth potential which is flexible and innovative. The companies should be run by experienced management and sport high liquidity. The fund also has significant exposure in large caps, while its allocation towards small caps is negligible. The fund follows a combination of the top-down and bottom-up approaches of investing with a fairly diversified portfolio of about 40-50 stocks, with single stock exposure limited to 5% of the portfolio.
3. DSP Midcap Fund:
The fund looks at investing in category leaders that have a higher growth potential than the overall market and are efficiently run (ROE > 15-16%) and managed by very capable and competent management with no corporate governance issues. The fund has a 100% track record of beating its benchmark.
4. L&T Midcap Fund:
L&T Midcap Fund follows a bottom-up style of investing. The fund manager is actively looking for investment opportunities arising out of the shift from unorganized to organized sector and significantly higher growth in smaller sectors of the economy. It looks at investing in companies trading at reasonable valuations.
5. UTI Mid Cap Fund:
UTI mutual funds have the advantage of UTI’s vast research and excellent management. The fund manager follows a conservative style of investment with a blend of Value and growth strategies. With CIO Vetri Subramaniam at the top pushing for style discipline, investors can be assured of process consistency.
6. Franklin India Prima Fund:
Fund Manager R Janakiraman has managed the fund since Feb 2011 and his experience shows in the fund’s performance. The fund looks at investing in fundamentally strong companies’ i.e. clean balance sheets, consistent earnings growth, high ROCE/ROE, and high corporate governance standards with a growth focus. The fund manager is willing to bear short term underperformance and has stuck to his investment process in the face of volatility. Investors should bear in mind the current uncertainty around the fund house given the saga unfolding in its debt funds.
7. Sundaram Mid Cap Fund:
The fund manager has changed from S Krishnakumar to S. Bharath in Feb 2021. At this point, we aren’t sure if the same investment strategy will be followed. Under the previous fund manager, the fund followed a buy and hold approach and invested in fundamentally strong companies with high growth potential and pricing power.
8. Kotak Emerging Equity Fund:
Kotak Emerging Equity Fund holds good quality and mostly fairly valued stocks. The fund follows growth at a reasonable price investment strategy. In past, it has performed consistently vs its own benchmark. After the current management took over under Nilesh Shah and Fund Manager Pankaj Tibrewal, the fund has a 100% of track record of beating its benchmark every three years earning its full marks for consistency.
9. Tata Mid Cap Growth Fund:
True to its mandate, the fund invests largely in mid cap companies. The fund follows growth at a reasonable price strategy.
10. BNP Paribas Mid Cap Fund:
The fund invests primarily in high growth opportunities in the mid-capitalization segment. The fund has managed to beat its benchmark consistently over a 5 year period.
Why choose MoneyWorks4Me?
There are close to 350 equity mutual funds to choose from. For a retail investor, it becomes an uphill task to choose funds that are worth investing in. It is even more difficult to invest in them at the right time. MoneyWorks4me can make these decisions much easier for you.
- Top 10 Large cap Mutual Funds 2021
- Top 10 Multi cap Mutual Funds 2021
- Top 10 Small cap Mutual Funds 2021
- Top 10 Tax Saving Mutual Funds 2021
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