According to the Finpeg CRAFT Framework, the following are the best large cap funds to invest in 2020 –

• Mirae Asset Large Cap Fund
• DSP Top 100 Equity Fund
• Axis Bluechip Fund
• Nippon India Large Cap Fund

These funds were chosen by us because they do well on certain pre-defined criteria. These criteria make Finpeg CRAFT Framework truly unique and more reliable than star ratings and rankings found elsewhere.

Read more about Finpeg CRAFT Framework for mutual fund selection here.

Here’s a quick introduction to each of the parameters we assess –

Finpeg CRAFT Framework

• Long Term Percentile Rank

This is the average percentile rank of the fund (among its peers) since January 2004. Additionally, it is based on 3-year rolling returns. This is relative measure since we are calculating the fund’s rank among its peers.

Lower the long-term percentile rank, better the relative performance.

• Top25 Percentage

This indicates how many times out of 100 did the fund appear in the top 25 percentile among its peers. This again is based upon a 3-year rolling returns basis. This is different from the first parameter since this is more focused toward consistency of performance.

Higher the top25 percentage, more consistent the relative performance.

• Downside Deviation

This is similar to standard deviation. Standard deviation considers volatility on the upside as well as downside. But the upside volatility is something that most investors are okay with. Hence, only the downside deviation is a better measure of riskiness of the fund.

Lower the downside deviation, lower is the risk associated.

• Near Term Percentile Rank

This parameter gives us a sense of the recent performance of the fund. We calculate 1-year average rolling returns for the last one year. Further, similar to the long-term percentile rank, we find the percentile rank of the fund among its peers.

Lower the near-term percentile rank, better the recent relative performance.  

• Total AuM

This number tells us two things –

• Is the fund large enough to have adequate liquidity?
• Is the fund size manageable?

This metric is not extensively looked at for best large Cap Mutual fund selection. This is because large cap stocks are among the most liquid. Hence, large Cap Mutual Funds are unlikely to see sustained underperformance due to a very large AuM. A small AuM, however, is a worrying factor as it also shows lack of investor confidence.

• Average Return in 2008-09

This shows how the fund was managed during the global financial crisis.  A positive return should be extremely encouraging.

Greater the average return in 2008-09, better the fund management during times of crises.

• Fund Manager Since

This is a very important check. This helps us determine how much of the fund’s performance is attributable to the current fund manager.

If we have amazing numbers, they don’t mean a whole lot if the fund manager has changed recently. Then, we dive into assessment of the new fund manager and try to measure the impact of his appointment.

Why Mirae Asset Large Cap Fund is the best large cap mutual fund

Mirae Asset Large Cap featured as the best multi cap mutual fund to invest in 2019. This is because back then it was a multi cap fund. But Mirae Asset decided to re-classify it as a large cap mutual fund after we released last year’s list of best mutual funds.

The fund is so good that even in the large cap space it has clinched the first spot.

A number of people had concerns regarding the re-classification of the fund. However, for all practical purposes, the fund was already a large cap fund under the mandate of multi cap funds. So, the fund has maintained its DNA and has not really transformed due to reclassification.

We have a couple of new entrants in the list – DSP Top 100 Equity Fund and Axis Bluechip Fund.

DSP Top 100 Equity, performance wise, probably doesn’t deserve to feature in this list. However, a big subjective factor is in its favour – Mr. Gopal Agrawal. Mr. Agrawal was the CIO at Mirae Asset and Mirae Asset Large Cap Fund was under his supervision. He has contributed a lot to the philosophy of the fund and a good portion of the fund’s performance is attributable to him.

We believe he will do well and change the fortunes of DSP Top 100 Equity Fund purely based on his track record of managing/supervising the best large cap fund in India.

Axis Bluechip Fund has performed amazingly well in the last couple of years. The fund manager has taken some amazing calls that are consistent with our investment philosophy here at Finpeg.

Compared to our list of best large cap funds of 2019, we have dropped ICICI Prudential Bluechip Fund. We had mentioned back then that the fund had a very good track record but the fund manager was new. Having observed its performance over the last one year, we feel that the last one year’s performance was not comparable to the fund’s earlier performance.

Return and risk of the best large cap mutual funds

The criteria we use to assess mutual funds are not straight-forward. However, they are very accurate and exhaustive.

At the end of the day, most investors are concerned with risk and return. In this section, we will have a look at the historical performances of the best large cap mutual funds listed above.

We will look at 3-year and 5-year rolling returns and standard deviations of the funds.

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