Focused funds are increasingly finding favour with investors seeking high-conviction equity exposure, with the category’s assets under management (AUM) rising to ₹1.72 lakh crore as of January 2026.

Governed by Sebi’s mandate to hold no more than 30 stocks, these schemes run concentrated portfolios while retaining the flexibility to invest across market capitalisations. This structure allows fund managers to take meaningful calls while still maintaining a reasonable degree of diversification.

Within this space, the Mahindra Manulife Focused Fund has emerged as one of the leading outperformers, delivering strong and consistent returns across market cycles while maintaining a disciplined, concentrated portfolio strategy.

On a point-to-point basis over one-, three-, and five-year periods, the fund has consistently outperformed its benchmark, the NIFTY 500 - TRI, by 1–6 percentage points across timeframes.

Over five years (as of February 20, 2026), the fund has delivered a compounded annual return of 20.3%, placing it among the top performers in the category. During this period, it has outpaced peers such as SBI Focused Fund, Invesco India Focused Fund, Kotak Focused Fund, and Franklin India Focused Equity Fund, according to Ace Mutual Fund data.

The data showed that the Mahindra Manulife Focused Fund has delivered competitive performance over shorter timeframes as well. On a one-year basis (as of February 20, 2026), the fund generated returns of 14.6%, outperforming the category average of 13.1% and edging past the NIFTY 500 - TRI, which returned 13.4% during the same period.

Over the three-year period, the fund delivered a compounded annual return of 21.9%, significantly higher than the Nifty 500 TRI’s 17.2% and the category average of 17.8%.

Top 5 funds offer up to 23% CAGR in 5 years

The data showed that HDFC Focused Fund emerged as the best performer in the focused fund category, generating a five-year CAGR of 23.1%. Second on the list was ICICI Prudential Focused Equity Fund, which delivered 20.4% annualised returns over the same period.

The Mahindra Manulife Focused Fund secured the third spot with a 20.3% CAGR, followed by the Invesco India Focused Fund, which posted 17.3% returns. The Kotak Focused Fund was among the top five performers, delivering a 16.3% CAGR over five years.

Notably, all five funds outperformed the broader NIFTY 500 - TRI, which returned 14.6% during the period, as well as the category average of 14.8%.

As per the data, the Mahindra Manulife Focused Fund’s rolling returns indicated consistent performance. Between November 2020 and February 2026, the fund outperformed the Nifty 500 TRI 100% of the time on a three-year rolling return basis. It also delivered returns above 15% in every observed rolling period. The mean three-year rolling return during this timeframe stood at 26.5%, compared with 17.5% for the benchmark.

For SIP investors, performance was steady as well. A systematic investment over the past five years would have generated an XIRR (extended internal rate of return) of 18.4%, significantly higher than the 13.4% XIRR from an SIP in the Nifty 500 TRI over the same period.

Smart portfolio positioning

The Mahindra Manulife Focused Fund generally maintains a large-cap bias, with over 80% of its portfolio allocated to large-cap stocks; as of January 2026, this stood above 92%. This tilt lends stability and moderates volatility, especially during turbulent phases. However, the fund remains nimble. When broader market momentum strengthens, it reduces large-cap exposure and selectively increases allocations to mid- and small-cap stocks to enhance returns.

Sectorally, financial services have consistently been the largest allocation, often accounting for over a third of the portfolio. This positioning has proved advantageous over the past 16–18 months, given the sector’s relative outperformance.

The fund has also maintained meaningful exposure to oil, gas, and consumable fuels, and has taken active overweight positions in traditional economy segments such as commodities, power, and PSU banks.

With corporate earnings recovering and macroeconomic fundamentals becoming supportive, the concentrated approach of focused funds may help investors capture meaningful gains from market optimism. While near-term global uncertainties, including evolving U.S. trade policies and escalating geopolitical tensions due to the U.S.–Iran conflict, may cause volatility, India’s structural growth story remains intact.

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