A specific kind of mutual equity fund known as a focused mutual fund exclusively invests in a small selection of stocks. According to the Securities and Exchange Board of India's regulations, these funds are only permitted to invest in a maximum of 30 equities.
The other mutual funds may only invest in up to 100 equities, making it the only mutual fund with these restrictions. They concentrate mainly on a few industries and do not distribute their investments over several stocks. A focused mutual fund's principal goal is to maximize returns by investing in high-performing assets. So, they select equities in accordance with their mandate.
Focused funds allocate their investments among a select group of well-researched securities. The "search for quality" strategy prevents them from reaping the rewards of diversity. This fund is thus also known as a "concentrated fund" or an "under-diversified fund".
Here are the top 10 focused funds offering the highest 5- Year returns.
| Name of Funds | 5- Year Returns(%) |
| IIFL Focused Equity Fund-Reg(G) | 14.73 |
| SBI Focused Equity Fund-Reg(G) | 14.25 |
| Quant Focused Fund(G) | 13.6 |
| Franklin India Focused Equity Fund(G) | 12.28 |
| Sundaram Focused Fund(G) | 12.14 |
| ICICI Pru Focused Equity Fund(G) | 12.12 |
| Nippon India Focused Equity Fund(G) | 12.11 |
| Axis Focused 25 Fund-Reg(G) | 11.39 |
| Aditya Birla SL Focused Equity Fund(G) | 9.85 |
| HDFC Focused 30 Fund(G) | 9.32 |
Note - 5-Year returns of focused funds as of 5th August 2022
Source: FundsIndia
Focused Funds are allowed to make investments in any market cap. They invest in small, mid, and large-cap enterprises since they have no restrictions. Additionally, they might adjust this division of firm sizes in accordance with the market. As a result, you have a portfolio that is flexible enough to adjust in response to market conditions in addition to one that is diversified across market capitalization.
This might not be the best fund for you to start with if you are new to investing. This is due to the fact that, in the short to medium term, targeted funds may be more volatile than any multi cap fund. So, if you have a few years of financial expertise, go with them, but be conscious of the risks involved.
