Pick the right stock, bet on focused funds if you have a high-risk appetite

The primary risk in these funds is that if the fund manager gets a few stock picks wrong, the fund's performance could take a significant hit

With several categories of active funds underperforming their benchmarks in recent years, fund managers have a few options to improve their performance: Take more concentrated bets, curtail expense ratio, and reduce churn in their portfolios. Focused funds, by their mandate, allow fund managers to follow the first of these strategies. 

According to the Securities and Exchange Board of India’s (Sebi’s) definition, focused funds cannot hold more than 30 stocks in their portfolios. As the table shows, the focused category has performed better than the multicap funds. Focused funds are run mostly as multi-cap strategies and he­n­ce, are most closely co­mparable with