According to reports from The Economic Times, Invesco India Midcap Fund has delivered an impressive 426% return over the past decade, establishing itself as the best-performing midcap fund in its category. The fund has successfully built assets under management of approximately ₹16,000 crore during this period, demonstrating the effectiveness of its concentrated investment approach. As reported by The Economic Times, the fund's performance has been driven by a long-term, earnings-focused strategy that looks beyond near-term valuation multiples and market noise.
According to Aditya Khemani, head of equities at Invesco, as reported by The Economic Times, the fund's investment process focuses on identifying businesses with strong earnings power, capable management teams, and a long runway for reinvestment. The fund maintains a reasonably concentrated portfolio where the top 10 stocks contribute to nearly half of the portfolio. In June, the scheme held 41 stocks with Prestige Estates, Federal Bank, Max Healthcare, Meesho and Global Health being the 5 largest holdings. The portfolio has a churn ratio of about 31%, translating into an average holding period of roughly three-and-a-half years. However, Khemani emphasizes that churn is not a targeted number, explaining that "for any fund, churn isn't a targeted number — as a fund manager you don't decide in advance what your churn will be; it's always an output." The intention is to hold a company for five years when it is initially purchased, with holding periods adjusting based on investment thesis and market conditions.
As reported by The Economic Times, Khemani emphasizes that stock price movements are important but earnings growth is far more critical. The fund focuses on how earnings can compound over a three-to-five-year period rather than on single-year projected earnings. According to the report, the fund's approach means that price-to-earnings multiples are not viewed in isolation, with the fund focusing more closely on qualitative judgments about earnings power. The strategy prioritizes companies that combine good business fundamentals with good management, with price coming third in the investment criteria. Khemani cited CDMO as an example, noting that Invesco participated in an IPO with certain expectations and increased exposure as execution improved over two to three years, despite the stock more than doubling. "There are a lot of factors to weigh," he said, including whether the business is getting stronger than expected and if the company is winning customers it couldn't before.
According to The Economic Times, across Khemani's portfolios, approximately 50-60% is oriented toward growth-style investing, while 40-50% is allocated to value or GARP-style opportunities. The challenge, as noted by Khemani, is that fast-growing companies have become expensive while slower-growing companies are being largely ignored. The fund manager emphasizes that the biggest risk in quality investments is companies that fail to reinvest adequately in future growth, particularly relevant in sectors such as hospitals, CDMO, electronic manufacturing, aerospace and precision engineering. Khemani said hospitals still have significant reinvestment potential because quality tertiary healthcare remains concentrated in a limited number of Indian cities, with expansion into tier-2 and tier-3 markets providing a longer growth runway.
As reported by The Economic Times, Khemani believes that institutional investors retain an edge through greater access to company managements and sector specialists, allowing deeper understanding of complex business models. The fund manager emphasizes that reacting to short-term news is unlikely to provide a sustainable edge, instead focusing on 'time arbitrage' - owning companies that may remain under pressure over the next three to six months but have potential to recover over two to three years. "The real edge available to a mutual fund manager today comes mainly from time arbitrage," he said. Khemani also advocates for treating quarterly results as facts that help test investment thesis rather than triggers for knee-jerk decisions. "In some businesses that are inherently lumpy, a result that looks weak and causes a 10–15% fall can actually be a buying opportunity," he explained. The strategy remains centered on identifying businesses where management quality, reinvestment opportunities and long-term earnings power can combine to create sustained value.
