A comprehensive study by Value Research has revealed significant portfolio overlap among equity mutual funds across different categories. According to the analysis, Bank of India Large & Mid Cap Fund and Bank of India Multi Cap Fund share 79.4% of their holdings, despite belonging to distinct fund categories. This finding challenges the conventional wisdom that investing across multiple equity fund categories automatically provides broader stock exposure.
Several other fund pairs demonstrate substantial portfolio overlap despite belonging to different categories. As reported by Value Research, Canara Robeco Flexi Cap Fund and Canara Robeco Large Cap Fund show 74.9% overlap, while Helios Flexi Cap Fund and Helios Large & Mid Cap Fund share 74.3% of their holdings. The analysis also identified Baroda BNP Flexi Cap Fund and Baroda BNP Large & Mid Cap Fund with 74.2% overlap, and JioBlackRock Flexi Cap Fund and JioBlackRock Large Cap Fund with 70.9% overlap.
Despite SEBI's prescribed investment mandates for each equity fund category, there remains considerable flexibility for fund managers to invest in similar stocks. According to the study, flexi cap funds can invest across large-cap, mid-cap and small-cap stocks without fixed allocation limits, while large & mid-cap funds must invest at least 35% each in large-cap and mid-cap stocks. Multi-cap funds require at least 25% each to large-, mid-, and small-cap stocks, with the remaining 25% invested freely.
Despite the high portfolio overlap, the funds demonstrate different performance profiles. As reported by Value Research, the BOI Large & Mid Cap Fund has delivered 15.12% annualised returns over three years and 5.84% over one year, while the BOI Multi Cap Fund generated 20.05% annualised returns over three years and 10.97% over one year. The funds share 52 stocks out of 64 total holdings in the multi-cap fund, with HDFC Bank accounting for 5.75% of the large & mid-cap fund compared to 4.89% in the multi-cap fund.
