LIC MF Focused Fund: Potential of creating alphas over long investment horizons

LIC Mutual Fund has recently re-introduced five of their flagship equity / equity oriented schemes aligning them with current market dynamics. These schemes are LIC MF Focused Fund, LIC MF Value Fund, LIC MF Small Cap Fund, LIC MF Dividend Yield Fund and LIC MF Multi Asset Allocation Fund. LIC MF has integrated new technologies and rolled out innovative features and strategies to strengthen the appeal of these schemes with investors, especially young and emerging investor base. In this article, we will review LIC MF Focused Fund.

Current market context

The equity market has consolidated since the announcement of ceasefire after Operation Sindoor. But it has mostly been trading in a somewhat narrow range, with support coming in at lower levels and profit booking at higher levels. Global equities outlook is cautious due to economic uncertainties about tariffs / counter tariffs and concerns about US fiscal deficit (with Moody's downgrading US Sovereign rating). The sharp correction in the last few months have brought valuations to reasonable levels across all market cap segments (see the chart below).

Source: National Stock Exchange, Period: 01.09.2024 to 31.05.2025

In current market conditions stock selection can play a crucial role in generating superior long term returns for investors.

What are Focused Funds?

Focused funds are equity mutual fund schemes that invest in maximum 30 stocks (as per SEBI's mandate). There are no market cap restrictions for these funds, in other words, they can invest across market capitalization segments. Though focused funds have higher concentration risks compared to more diversified funds which invest in a larger portfolio of stocks (e.g. 50 – 60 stocks), slightly concentrated holdings allow the fund manager to allocate higher weights to high conviction stocks which have the potential of creating alphas for investors over long investment horizon. Each stock is expected to contribute significantly to the Scheme's overall performance. Adding a focused fund to your equity mutual fund portfolio may increase potential portfolio alphas.

About LIC MF Focused Fund

LIC MF Focused Fund has a concentrated portfolio of up to 30 high-conviction stocks, backed by deep research and meaningful allocations. Offers flexibility across sectors and market caps which is ideal for growth-oriented investors seeking an actively managed yet focused strategy. Mr. Jaiprakash Toshniwal and Mr. Sumit Bhatnagar are the fund managers of this scheme.

Performance of LIC Focused Fund

Source: Advisorkhoj Research, as on 31^st May 2025

Wealth creation through SIP

The chart below shows the growth of Rs 10,000 monthly SIP in LIC MF Focused Fund since the inception of the scheme (24^th November 2017). With a cumulative investment of Rs 18.4 lakhs you could have accumulated a corpus of Rs 9.1 lakhs, you could have accumulated a corpus of Rs 15.5 lakhs

Source: Advisorkhoj Research, as on 31^st May 2025

SWP track record

The chart below shows the results of Rs 30,000 monthly SWP from a lump sum investment of Rs 50 lakhs in LIC MF Focused Fund since the inception of the scheme. You can see that, despite making a withdrawal of Rs 36 lakhs from your initial investment of Rs 50 lakhs, the market value of your balance units in LIC MF Focused Fund would have grown to Rs 59.1 lakhs. This shows that for moderate withdrawal rates, SWP from LIC MF Focused Fund can generate regular cash flows, as well as capital appreciation.

Source: Advisorkhoj Research, as on 31^st May 2025

Fund has started outperforming the benchmark

Though the fund had struggled earlier to beat the benchmark, it has started beating the benchmark index in the last 1 year.

Source: Advisorkhoj Research, as on as on 31^st May 2025

Portfolio strategy and positioning

• Scheme invests in best opportunities that the market presents, without any sector bias with an underlying focus to build a portfolio of both value and growth companies.


• It follows a bottom-up approach for stock-picking and chooses companies across industry sectors and market capitalization segments.


• It primarily focuses on companies that have demonstrated characteristics such as market leadership, strong financials and quality management


• It selects companies that have the potential to create wealth for their shareholders by delivering steady performance through the ups and downs of the market.

The scheme is currently biased towards small and midcaps. The small cap allocation of the portfolio is 47.25%, while midcap allocation is 15.3%. At the same time the large exposure of the scheme is nearly 32%. The chart below shows the top sectors and holdings of the LIC MF Focused Fund.

Source: LIC MF February Factsheet, as on 30^th April 2025

Low overlap with other LIC MF diversified equity funds

The graphic below shows the portfolio overlap of LIC MF Focused Fund with other LIC MF diversified equity funds. You can see that LIC MF Focused Fund has low overlap with other LIC MF equity schemes.

Source: LIC MF April Factsheet, as on 30^th April 2025

Medium to long term outlook

The Indian economy has strong resilience amidst slowdown in other major economies. Fitch has revised FY 2025-26 GDP growth from 6.2% to 6.4%. As per IMF projections given in its World Economic Outlook database for April 2024 are right, India will overtake Japan to become the fourth largest economy in the world by 2025 and likely to overtake Germany to become the third largest by 2027. The changing global supply chain dynamics is likely to benefit Indian companies. Despite the near term headwinds due to global risk factors, the long term outlook for Indian equities is positive. Re-introduction of LIC MF Focused Fund with advanced investment strategies, aligned with current market conditions, can make this scheme appealing both for existing and new investors.

Why invest in LIC MF Focused Fund?

• High conviction stock picks - The scheme will focus on concentrated portfolio of securities across the sectors. Main aim of the scheme is to generate better risk adjusted returns from a certain high conviction stock picks.


• Buy and Hold strategy - Scheme adopts "Buy and Hold" strategy for investment. The focus will be on selecting the right stock at right price and holding the same skilfully through different business cycles which will help the investors to get benefits from entire growth cycle.


• Reasonable diversification - Though the scheme will have concentrated portfolio, fund managers will try to create the reasonable diversification across sectors which will help to control the risk associated with such funds.


• Potential for long term growth - The stocks are selected after considering the performance of these stocks over different market cycles. The scheme focuses to benefit from the long term performance of these stocks without getting affected by their short term market volatility.

Who should invest in LIC MF Focused Fund?

• The fund is suitable for the investors who are looking for capital appreciation with a long-term investment horizon of more than 5 years.


• Those who have high to very high risk appetite


• You can invest either in lump sum or SIP depending on your financial situation and investment needs.


• If you are worried about volatility, you can also invest in the scheme through 12 months Systematic Transfer Plan (STP) from LIC MF Liquid Fund.

Investors should consult with their financial advisors or mutual fund distributors if LIC MF Focused Fund is suitable for their investment needs.