Franklin India Bluechip Fund is among the leading diversified equity funds in the country today.
It is among the premier equity funds launched in the private sector and over the last 10 years of its inception it has come to acquire a reputation rooted in a solid and consistent performance record. But how does the fund compare to its international peers?
To answer that question we have taken a diversified equity fund from Franklin Templeton of US with, you guessed it, the same name!
But that is not where the coincidence ends -- Franklin Blue Chip Fund is also a diversified equity fund investing in large caps with a long-standing track record.
Domestic mutual fund investors have been hearing of how mutual funds in the developed markets are more professionally managed and investors over there have it a lot better. We have taken some key criteria to put this premise to the test.
Investment objective
Franklin India Bluechip Fund
Aims to provide medium to long-term capital appreciation
Franklin Blue Chip Fund
Seeks to generate long-term capital appreciation by investing mainly in equity securities of high quality, blue chip companies located in the US with market capitalisation of $1 billion or more.
The investment objective in the case of the latter is a lot more pointed. Investors know upfront on reading the investment objective of Franklin Blue Chip Fund that it will invest in stocks with a minimum market cap of $1 bilion.
So there are no surprises in store for the investor in terms of a small cap or a relatively unknown company finding its way in the portfolio. Compared to that, Franklin India Bluechip Fund's investment objective is 'open' and is not as pointed. Investors do not necessarily get a feel for its portfolio and investment approach by reading just the investment objective.
Loads
Franklin India Bluechip Fund
Entry Load: 2.25%
Exit Load: Nil
Franklin Blue Chip Fund
Entry Load: 5.75% (for Class A investors)
Exit Load: Nil
Most domestic mutual fund investors are probably upset at the 'high' entry load of 2.25% that Franklin India Bluechip Fund charges investors.
Of course, they can't really be blamed for this grievance given that loads have crept up steadily from levels of 1.75% to 2.25% in a matter of a few months in the case of frontline fund houses like Templeton Mutual Fund and HDFC Mutual Fund.
Even then, is 2.25% really that high? Only a cursory glance at Franklin Blue Chip Fund's 'higher' entry load (5.75%) should perish that grievance.
This is not to suggest that Indian mutual fund investors should be 'grateful' for the lower loads over here. But when you see more than double the load in a market like the US, which is extremely cost-conscious, you certainly have reason to feel relieved.
Expense Ratio
Franklin India Bluechip Fund
Expense Ratio -- 1.91%
Franklin Blue Chip Fund
Expense Ratio -- 1.82%
One area wherein domestic fund investors have cause to complain and rightly so are higher expenses. In the Indian context an expense ratio of 1.91% is on the lower side (equity funds are known to have expenses as high as 2.50%).
However, Franklin India Bluechip's expense ratio is far higher than the 1.82% that Franklin Blue Chip Fund has to show. Higher expenses eat into returns because ultimately the asset management company (AMC) pays its expenses from its net assets (i.e. investor's monies).
While we don't suggest that domestic fund investors start comparing every fund they own or plan to own with the American counterpart, but it nonetheless helps to build a perspective.
And what do you know, if the Reserve Bank of India does get more liberal with the $25,000 investment guideline, you could actually invest in Franklin Blue Chip Fund as well.
