PGIM India Flexi Cap Fund: Growing through an Actively Managed Diversified Portfolio

PGIM India Flexi Cap Fund is a top quartile performer in the Flexi-cap fund category that has generated superior gains for its investors and also stands out in terms of risk-adjusted returns by following an active investment strategy.

Past performance is not an indicator of future returns
Data as on October 25, 2022
(Source: ACE MF)

PGIM India Flexi Cap Fund has been a top-quartile performer in the Flexi Cap Fund category. In the last 2-year and 3-year period, the fund has generated outstanding compounded annualised returns of 27.8% and 25.4%, respectively, which has enabled it to generate a remarkable lead over the benchmark Nifty 500 - TRI and most of its prominent peers. PGIM India Flexi Cap Fund now stands among the top quartile performers across time frames, except for the last one-year period. Over the longer 5-year and 7-year periods, PGIM India Flexi Cap Fund's outperformance over the benchmark has been in the range of around 2-4 percentage points on a CAGR basis.

PGIM India Flexi Cap Fund's recent outperformance has enabled it to rank high in terms of risk-adjusted returns. Though the volatility registered by the fund is slightly higher than the category average, it is nearly in line with the benchmark, while its risk-adjusted return, as denoted by Sharpe Ratio (0.26), is among the highest in the Flexi-cap fund category and far ahead of the benchmark.

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Investment strategy of PGIM India Flexi Cap Fund

Being a Flexi Cap Fund, PGIM India Flexi Cap Fund has the mandate to invest a minimum of 65% of its assets in equity and equity-related instruments with no restriction on market cap allocation. The fund has the flexibility to increase or decrease exposure to large-cap, mid-cap or small-cap stocks as per the market dynamics and the fund manager's view on the market. Accordingly, the fund managers invest across industries, sectors, and the market cap spectrum. PGIM India Flexi Cap Fund seeks to actively manage a well-diversified portfolio of strong growth companies with sustainable business models by utilising the bottom-up approach. It lays high emphasis on RoCE and ROE to identify high-growth companies.

While picking stocks for the portfolio, the fund managers give consideration to price-to-earnings, price-to-book value, and price-to-sales ratios, as well as growth, margins, asset returns, and cash flows, among other factors. They conduct in-house research in order to identify various investment opportunities. PGIM India Flexi Cap Fund is benchmark agnostic in its approach, and investments are made as per the fund manager's outlook. Following an active investment strategy, many stocks in the portfolio are held for a shorter time period. Accordingly, PGIM India Flexi Cap Fund's portfolio turnover ratio is usually on the higher side, signifying a higher churn rate in the portfolio. Notably, the fund has recorded a turnover ratio in the range of 130% to 150% in the last 12 months.

PGIM India Flexi Cap Fund usually holds a well-diversified portfolio of about 40 to 50 stocks. As of September 30, 2022, the fund held 48 stocks in its portfolio, reasonably diversified across market caps and sectors. The top 10 holdings accounted for about 39.4% of the portfolio. ICICI Bank, HDFC Bank, Mahindra & Mahindra, NTPC, Axis Bank, Cholamandalam Investment & Finance Company, and Infosys currently figure among the top 10 holdings of the fund. The fund has limited the allocation in most of its top holdings to under 5%.

In the last one year, PGIM India Flexi Cap Fund benefitted the most from its holdings in Esab India, SKF India, ICICI Bank, and Siemens. At the same time, its exposure to Birla Corporation, Can Fin Homes, Infosys, Ultratech Cement, and Persistent Systems eroded some of its gains.

PGIM India Flexi Cap Fund's portfolio is skewed towards Financials, Engineering, Auto & Auto Ancillaries, and Infotech having a combined allocation of 64.2%. Cement, Consumption, Consumer Durables, and Power are the other prominent sectors with an exposure of about 3% to 5%. The top 10 sectors in PGIM India Flexi Cap Fund's portfolio together account for around 80.7% of its assets. The fund's portfolio is fairly diversified across cyclical, defensive, and sensitive sectors.

Suitability

PGIM India Flexi Cap Fund holds a well-diversified portfolio of stocks spread across market caps and sectors. It has done well to timely identify various opportunities in the large-cap, mid-cap, as well as small-cap space. Notably, the fund's performance may deviate significantly from its popular Flexi-cap peers that hold higher exposure to stocks in the large-cap segment.

As PGIM India Flexi Cap Fund follows an active investment strategy, its portfolio could be prone to high volatility. Despite this, the fund has ensured that the overall risk is kept well within limits, thereby delivering superior risk-adjusted returns for its investors. Though the fund may at times struggle to keep pace with the benchmark, it has the potential to reward investors with superior gains over complete market cycles.

PGIM India Flexi Cap Fund is suitable for investors looking for an actively managed Flexi Cap Fund with an investment horizon of at least 5 years.

Warm Regards,
Divya Grover
Research Analyst

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Note:  This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

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