Introduction: The Battle of the Heavyweights
In the dynamic world of mid-cap equity funds, two contenders stand out: Edelweiss Mid Cap Direct Plan Growth and Invesco India Mid Cap Fund Direct Growth. Both funds have carved a niche in the mid-cap category, offering investors a chance to capitalize on the growth potential of mid-sized companies. This head-to-head comparison will delve into their performance metrics, risk-adjusted returns, sector allocations, and expense ratios to help investors make an informed decision.
Performance Breakdown: Returns vs Risk
Rolling Returns
When it comes to rolling returns, both funds have shown commendable performance. However, Invesco India Mid Cap Fund edges out slightly with a 1-year rolling return of 24.66% compared to Edelweiss's 23.27%. Over a 3-year period, Invesco again leads with 28.91% versus Edelweiss's 28.24%. However, Edelweiss takes the lead in the 5-year rolling return with 22.7% compared to Invesco's 22.11%.
Capital Protection: Max Drawdown and Recovery
In terms of capital protection during market downturns, Edelweiss Mid Cap shows a slightly better resilience with a 1-year max drawdown of -7.29% and a recovery period of 275 days. In contrast, Invesco India Mid Cap experienced a larger 1-year drawdown of -9.71% and has yet to fully recover. Over a 3-year period, both funds had similar max drawdowns of around -20%, but Edelweiss recovered in 313 days compared to Invesco's 271 days.
Risk-Adjusted Performance
- Sharpe Ratio: Edelweiss Mid Cap boasts a higher Sharpe Ratio of 1.2723, indicating better returns per unit of risk compared to Invesco's 1.1527.
- Sortino Ratio: Edelweiss also leads with a Sortino Ratio of 1.6355, suggesting superior downside risk protection over Invesco's 1.4689.
- Alpha: Edelweiss Mid Cap generates a higher alpha of 5.1586, outperforming its benchmark more effectively than Invesco's alpha of 3.9527.
Edelweiss Mid Cap emerges as the better compounder on a risk-adjusted basis, offering higher returns with more effective risk management.
Portfolio Overlap & Sector Bets
Both funds share a portfolio overlap of 21.08%, with common holdings in companies like BSE Ltd. and The Federal Bank Ltd. However, their sector allocations differ significantly:
- Edelweiss Mid Cap: The fund has a diversified sector allocation with a focus on Financials (24.12%), Services (11.67%), and Automobiles (9.25%).
- Invesco India Mid Cap: This fund places a heavier bet on Financials (30.2%) and Services (22.37%), with a notable allocation to Healthcare (18.21%).
The difference in returns can be attributed to these sector bets. Invesco's heavier allocation to Financials and Services has driven its recent outperformance, while Edelweiss's more balanced sector approach offers stability.
The Final Verdict: Which Should You Buy?
For aggressive investors seeking higher short-term returns and willing to accept greater volatility, Invesco India Mid Cap Fund may be the better choice due to its recent outperformance in rolling returns and sector bets on Financials and Services.
Conversely, conservative and long-term investors may prefer Edelweiss Mid Cap Direct Plan Growth for its superior risk-adjusted performance, better capital protection during downturns, and a more balanced sector allocation. Its lower expense ratio of 0.420% compared to Invesco's 0.540% also means investors are getting more alpha for their money.
Ultimately, the choice between these two funds should align with the investor's risk tolerance, investment horizon, and sector preferences.