Axis Mutual Fund (MF), the eighth-largest fund house in India, is experiencing a revival in fund returns after its schemes languished at the bottom half of the chart for nearly two years. A majority of its equity and hybrid funds have moved to the top half of the one-year return charts in their respective categories, with several schemes also showing recovery in longer timeframes.
The fund house, which undertook a major restructuring in 2023 to reinvigorate its underperforming equity schemes, attributes the turnaround in the near-term performance to significant changes in the fund management team and investment process. Current CEO, B Gopkumar, and CIO, Ashish Gupta, took charge in early 2023.
CIO Gupta said the fund house-made strategic adjustments to its equity investment framework to adapt to the evolving market scenario while maintaining its existing 'growth' investment style. Among various measures, the fund house strengthened its equity team and expanded its stock universe from 328 stocks in 2023 to 450 by the end of 2024.
"Quality and growth remain the cornerstones of our investment strategy. However, we have diversified our portfolios to align with the evolving economic dynamics, as GDP growth has become more broad-based," Gupta said.
"In the last few years, growth and high return on capital employed (ROCE) are visible not just in the business-to-consumer space but also in the business-to-business sector. Similarly, such companies are no longer limited to the services sector and are available in the manufacturing sector, as well. Therefore, our portfolios are now more diversified across a larger set of industries and companies," he said.
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This broadening of the market was one of the key factors behind the fund house's performance slump in 2022 after it had dominated the equity returns chart in the previous 4-5 years.
The fund management team has seen four new additions: Jayesh Sundar, Sachin Relekar, Tejas Sheth, and Vishal Agarwal. Additionally, six research analysts have joined the firm since March 2023.
The performance improvement is also due to quality stocks outperforming the 'value' segment once again. While most of the funds are now in the top two quartiles in the one-year timeframe, most schemes are still in the bottom half of the return chart in longer timeframes.
As of December 31, 2024, only its value fund, balanced advantage fund, and multicap funds are in the top two quartiles of their respective categories based on their three-year performance.
Mutual fund scheme performance is generally assessed through a quartile system, where the top 25 per cent of schemes are in quartile one, the next 25 per cent in quartile two, and the remainder in quartiles three and four. Fund managers aim to be in the top two quartiles consistently.