Franklin Prima or Prima Plus: Which is better to invest via SIP?

The returns are tepid, and should I exit the fund. Are Franklin India Prima Fund and Franklin India Prima Plus both the same scheme? If not,

which fund is a better option to invest in through SIP?

-J Seetharamanjaneyulu, Kakinada

Franklin India Prima Fund and Franklin India Prima Plus are not the same. Franklin India Prima Fund scheme is a dedicated mid-cap scheme, whilst the Franklin India Prima Plus scheme is a multi-cap fund as it predominantly invests in a diversified equity portfolio consisting of large-cap, mid-cap, and small-cap stocks.

In June 2018, Franklin Templeton AMC changed 24 of its mutual fund schemes to comply with Sebi's regulations. Some schemes with the same investment objectives were merged into one scheme. A few Franklin Templeton fund schemes have been renamed due to the re-categorisation. As a result, most of the schemes' benchmarks changed. The re-categorisation and merger of schemes align with Sebi's new rules on categorising mutual funds.

Franklin India Prima Plus Fund scheme is an open-end growth scheme launched in 1994. The fund's investment objective is capital growth and regular dividend through a diversified portfolio of equities, fixed-income securities and money market instruments. Hence the fund scheme was merged with Franklin India Equity Fund, which follows similar investment objectives. The fund can invest 65 per cent to 100 per cent in equities and up to 35 per cent of the corpus in debt instruments. Accordingly, Franklin India Prima Plus, on average, maintained an allocation of over 90 per cent to equities and 10 per cent to debt instruments. The scheme's risk, volatility and returns have been lower due to the nature of the fund. Large-cap funds are less risky and volatile than mid-cap and small-cap fund schemes. The Franklin India Prima Plus Fund currently holds AUM (Assets under Management) worth Rs 11,800 crore. The scheme is a diversified equity scheme investing predominantly in large-cap stocks with allocation to mid-cap stocks and small-cap stocks. After the re-categorisation, the Franklin India Prima Plus scheme was renamed Franklin India Equity Fund.

Franklin India Equity Fund (previously known as Franklin Prima Plus) is a multi-cap fund with a diversified equity portfolio investing in large-cap, mid-cap and small-cap stocks. However, the majority of AUM is invested in large-cap stocks. The benchmark of Franklin India Equity Fund is the Nifty 500. With exposure to large-cap stocks, the fund generates lower returns and is less volatile. Returns will be subdued compared to mid-cap and small-cap so as the risk and volatility. Investors with a low-risk appetite and longer horizon may consider this fund an alternative.

On the other hand, the Franklin India Prima Fund scheme did not undergo any changes and remained a mid-cap fund. However, the benchmark of the Franklin India Prima Fund scheme changed from Nifty 500 and Nifty Free Float Mid-Cap 100 to Nifty Mid-Cap 150. Franklin India Prima Fund scheme is an open-ended growth scheme with an investment objective to give medium to long-term capital appreciation. The scheme currently holds AUM worth Rs 7,500 crore. The expense ratio is 1.88 per cent, while the category average stands at 2.09 per cent. Its current NAV (net asset value) is Rs 1,545. The fund has invested 97 per cent of the corpus in equities and three per cent in others. As much as 74 per cent of the corpus of Franklin India Prima Fund was invested in mid-cap stocks, 19 per cent in large cap and 7 per cent in small cap stocks. The fund has delivered 18 per cent returns since inception (1993), whereas the category average is 14 per cent. The fund's trailing returns are -7.5 per cent for one year, 18 per cent for three years, and 9.9 per cent for five years. Whereas mid-cap funds category returns for the same duration are: -2.8 per cent for one year, 25 per cent for three years, and 12 per cent for five years.

The fund's performance is subpar compared to similar schemes in the mid-cap fund category. This is a high-risk fund. The fund has not given any decent returns in the past few years, even though the fund has the potential to generate high returns. We should understand that mid-cap schemes are more volatile than large-cap fund schemes and multi-cap fund schemes. Those willing to take risks and seeking to invest for a long-term horizon, say three years and more, may invest in mid-cap funds. Franklin India Prima Fund shall levy an exit load of one per cent if redeemed mutual fund units within one year to discourage investors from exiting from the scheme. You may look at alternative mid-cap fund options compared to Franklin India Prima Fund. Your investments in mutual funds must align with financial goals and tax planning.

(The author is a SEBI licensed Research Analyst. The alumnus of the Indian Institute of Foreign Trade (IIFT), he had held leadership roles at National Geographic, Reliance Radio Television Luxembourg, STAR TV, etc)