Franklin Prima Plus: Plays it safe with large-cap tilt

This fund takes a conservative approach and is never fully invested in equities

Given that most mid- and small-cap stocks (market capitalisation below ₹10,000 crore) have inched up sharply, funds with a large-cap bias carry lower risk at this juncture. Since the market has also become a bit volatile in recent times, large-cap oriented funds will contain losses better than mid- and small-cap funds as well. Franklin Prima Plus fits the bill for those looking to invest in such large-cap oriented funds.

Strategy

Franklin Prima Plus can be described as a fund that follows a slightly conservative approach. The fund is never fully invested in equities. Its equity exposures remain at 90-95 per cent most of the time. When uncertainties seem higher, the fund is quick to cut this further and increase its cash holdings.

For instance, when volatility hit the market in 2015, the fund increased cash holdings from 4 per cent in January 2015 to 9 per cent by May that year. It continued to be high on cash throughout 2015.

Secondly, while the fund takes 20-25 per cent exposure to mid- and small-cap stocks in rallies, it is quick to turn cautious when conditions begin to look unfavourable. Thirdly, sectors such as pharma and consumer non-durables, considered defensive bets, are almost always among its top holdings.

It is this nature to be on guard that has taken a bit of sheen away from it in the last one year. Even as mid- and small-cap stocks continued to do well, the fund has cut exposures to this space. It held only 10-12 per cent in these stocks in this period. Besides, though pharma stocks continued to take a knock in the past year, the fund held a steadfast 7-8 per cent in this space. However, with markets showing some volatility, the large-cap bias will come in handy. Also, with pharma stocks having been beaten down badly this year, the downside seems limited from hereon.

Over longer periods of three and five years, the fund has convincingly beaten the benchmark by 3-5 percentage points. Its performance in this period has been on par with or better than peers such as Aditya Birla Sun Life Frontline Equity, BNP Paribas Equity and HDFC Top 200.

Exposure to software cut

Banking has been the top sector holding across cycles. Its holding in this space has moved up by five percentage points since the beginning of this year. Given the headwinds in the software sector, the fund has cut exposures to this space in recent times. Auto stocks have seen heightened interest. The fund holds Mahindra & Mahindra, Hero MotoCorp, Tata Motors and Bajaj Auto.

Usually, the fund takes 1-3 per cent exposure to foreign stocks and holds MakeMyTrip currently.

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