en-GB Manager R. Janakiraman has earned his place in the sun. Before becoming the lead manager here in February 2011, R.Janakiraman comanaged it alongside the seasoned K.N. Sivasubramanian since February 2008. Sivasubramanian continued to comanage the fund till his retirement in February 2014, the role that was later taken over by Roshi Jain and then by Hari Shyamsunder on May 2016. Shyamsunder joined the fund house in 2009 as a research analyst. Janakiraman has an extensive research experience in the small/mid-cap segment spanning over 19 years, which makes him an obvious choice for running fund house's small/mid-cap strategies. Besides this fund, he has been managing Franklin India Prima Fund since February 2011. The investment team comprises four portfolio managers, 14 analysts (of which four acts as comanagers), and a research head. While there has been some turnover in the analyst team, the exiting members were replaced by experienced and capable analysts. Nonetheless, it is an experienced, well-resourced, and high calibre team. All managers share research responsibilities. The investment team benefits from the presence of Anand Radhakrishnan (CIO – India equities) at the top, as he is an experienced hand in portfolio management. The three--Radhakrishnan, Janakiraman, and Roshi Jain--make a strong combination. We also draw confidence from the team-driven investment approach for which Franklin Templeton is known. The fund invests primarily in quality small-cap companies with established track record. R. Janakiraman's investment style bears out what he professes to do--invest in good-quality small-cap stocks and stay invested for the long haul, as evident from its low turnover ratio (March 2018: 22%; March 2019: 12%). He is flexible while constructing the portfolio. For instance, to accommodate fund's burgeoning size, he not only increased the number of holdings in the portfolio but also bought down the concentration in its top 10 holdings. Small-cap bias is apparent, with a minimum 70% of assets invested in small-cap stocks. Large caps account for 15% and is mainly for managing liquidity. Janakiraman's benchmark-agnostic approach coupled with bottom-up stock-picking results in a portfolio that is distinct from the benchmark index or peers. However, the manager does take top-down calls. A belief that the Indian economy will soon be back on a growth trajectory, which would also propel infrastructure growth in the country, the manager is focussing on the private construction space and stocks that stand to benefit from the growth therein. However, the manager would not shy away from exiting a stock if the business faces genuine and structural deterioration. However, the manager has been a bit cautious in terms of exiting few businesses that were facing stress, such as Yes Bank and Vodafone Idea, which adversely afftected its performance. This approach therefore requires refinement. Janakiraman homes in on quality growth-oriented companies with strong competency biases. Fundamental research forms the crux of the investment process. The coverage list for small/mid-caps is built by the portfolio managers in conjunction with the analysts. When selecting companies, the investment team places strong emphasis on qualitative aspects such as managerial strengths and corporate governance standards; also, rigorous business analysis is performed to understand the growth prospects of the industry, its competitive landscape, entry barriers, the company's market share, and scalability prospects of the business, among others. Analysts construct sector-based model portfolios comprising the best ideas from stocks in their investment universe, which in turn is compiled by the research head to construct a diversified small/mid-cap portfolio. R. Janakiraman uses this model portfolio as his initial reference point, and he selects companies that can generate consistent and sustainable earnings growth over a business cycle and that have low leverage and reasonably high ROEs. He is aware that it is difficult to forecast earnings in small/mid-caps over a long-term horizon given the unpredictable nature of their cash flows; hence, he uses historical five-year data as a yardstick to project five years ahead. He is not very rigid on valuations, so long as the company fulfils his investment criteria. We believe the process is robust and Janakiraman can make it work. The fund's exposure to risky small/mid-caps makes it apt as a supporting role in a portfolio. Supporting Player A promising fund for risk-taking investors. Small/micro-cap funds tend to be extremely volatile with dramatic ups and downs depending on market conditions and the investment strategy with which they are run. But Franklin India Smaller Companies Fund has put up appealing results since manager R. Janakiraman took over its reins in February 2011. Under him, the fund has outperformed 82% of its category peers on returns and 91% on Morningstar Risk-Adjusted Returns front. It ranks comfortably in the category's top quartile over the managers' tenure, with relatively lesser volatility. Being a designated small/mid-cap specialist with the fund house, Janakiraman is conversant with the risks associated with investing in this segment. Intensive research therefore forms the core of his investment approach. Given the fund's mandate is to invest predominantly in small-cap stocks, Janakiraman places more emphasis on due diligence of the company before investing. The focus is on investing in quality companies with low leverage, healthy returns on equity, free cash flows, and consistent growth possibilities. He avoids companies that don't have an established track record. For liquidity management, Janakiraman invests around 15% of the portfolio in large-cap stocks and up to 10% in cash. That said, small/micro-caps are tricky beasts and the risks of running such funds are magnified during unfavourable market conditions. For instance, the fund can experience bouts of extreme volatility during market downturns and may witness a prolonged underperformance when the small-cap segment hits a rough patch. Its underperformance this year is a case in point. Further, the fund has grown steadily as it has continued to rack up solid returns and attracted flows. Going ahead, the increasing asset size may pose a challenge for the manager. We would like to see the asset-management company taking steps to restrict flows in the fund when it starts facing capacity constraints. Having said that, we draw confidence from Janakiraman's focussed approach and skilled execution capabilities. He appears at home with his investing style and has been fairly disciplined in his approach. Hence, the fund's attractive traits continue to merit a Morningstar Analyst Rating of Silver. 737 Publicly traded but family managed, Franklin Resources BEN is parent to Franklin Templeton Investments. A global asset manager with USD 734 billion in assets (as of July 2018), the firm has grown through acquisitions; historically, it has not interfered with those investment cultures. That said, Franklin's struggles with outflows in recent years have led to some changes. The firm launched several customised "LibertyQ" ETFs starting in 2016. While many active managers have taken steps to attract investors who favour cheaper, more-passive options, Franklin also launched single-country equity ETFs, an odd fit in its fund lineup. The firm also made changes to investment team leadership, including the 2017 creation of the FT Investment Solutions Group headed by longtime Franklin Income portfolio manager Ed Perks and the appointments of Templeton's Stephen Dover to head of equities and risk team veteran Mat Gulley to head of alternatives. It combined some value-equity investment personnel under the Mutual Series boutique, and the firm has emphasised centralised risk management owing to the struggles of some of its flagship funds. These changes are sensible, and the firm has some strong offerings globally, including its India- and UK-based equity funds. Given the magnitude of the changes and the longer-term struggles of much of its US equity, US taxable, and emerging-markets equity fund lineup, however, the firm's Parent rating remains Neutral. Changes afoot. 2018-10-29T07:07:00 2018-10-29T12:07:00Z The fund's performance in the recent times has been below expectation. The fund's relatively mediocre performance on few occasions in the recent times has not augured well for the fund and its long-term performance. In 2017, the fund delivered third-quartile performance. While exposure to few healthcare stocks didn't fare well, investments in some select stocks such as Tata Motors and Amara Raja Batteries, among others, dragged its performance down. On a broader basis, R. Janakiraman's strategy of staying away from momentum stocks and his quality and valuation focus was also out of favour. The fund has been going through a rough patch once again this year. While stocks related to consumption demand such as auto, retail, and lodging haven't performed well, Janakiraman's investments that are linked to the economic and infra growth such as cement, engineering, and capital goods companies also struggled. In addition to that, his investment in few select stocks such as Yes bank, Karur Vysya bank, Rapco Home Finance, and Vodafone Idea among others also added to its underperformance. This recent track record has dented the fund's performance over the three- as well as five-year period relative to category peers. However, under Janakiraman (February 2011 - November 2019), the fund clocked an annualised 16% return outperforming 82% of the category peers. Moreover, despite intermittent hiccups, his liking for higher-quality companies has helped keep the fund's volatility below average. It's critical to evaluate expenses, as they come directly out of returns. The share class on this report levies a fee that ranks in its Morningstar category's second-cheapest quintile. Based on our assessment of the fund's People, Process and Parent pillars in the context of these fees, we think this share class will be able to deliver positive alpha relative to the category benchmark index, explaining its Morningstar Analyst Rating of Silver. F00000PDY6 A promising fund for risk-taking investors. Small/micro-cap funds tend to be extremely volatile with dramatic ups and downs depending on market conditions and the investment strategy with which they are run. But Franklin India Smaller Companies Fund has put up appealing results since manager R. Janakiraman took over its reins in February 2011. Under him, the fund has outperformed 82% of its category peers on returns and 91% on Morningstar Risk-Adjusted Returns front. It ranks comfortably in the category's top quartile over the managers' tenure, with relatively lesser volatility. Being a designated small/mid-cap specialist with the fund house, Janakiraman is conversant with the risks associated with investing in this segment. Intensive research therefore forms the core of his investment approach. Given the fund's mandate is to invest predominantly in small-cap stocks, Janakiraman places more emphasis on due diligence of the company before investing. The focus is on investing in quality companies with low leverage, healthy returns on equity, free cash flows, and consistent growth possibilities. He avoids companies that don't have an established track record. For liquidity management, Janakiraman invests around 15% of the portfolio in large-cap stocks and up to 10% in cash. That said, small/micro-caps are tricky beasts and the risks of running such funds are magnified during unfavourable market conditions. For instance, the fund can experience bouts of extreme volatility during market downturns and may witness a prolonged underperformance when the small-cap segment hits a rough patch. Its underperformance this year is a case in point. Further, the fund has grown steadily as it has continued to rack up solid returns and attracted flows. Going ahead, the increasing asset size may pose a challenge for the manager. We would like to see the asset-management company taking steps to restrict flows in the fund when it starts facing capacity constraints. Having said that, we draw confidence from Janakiraman's focussed approach and skilled execution capabilities. He appears at home with his investing style and has been fairly disciplined in his approach. Hence, the fund's attractive traits continue to merit a Morningstar Analyst Rating of Silver. 737 Publicly traded but family managed, Franklin Resources BEN is parent to Franklin Templeton Investments. A global asset manager with USD 734 billion in assets (as of July 2018), the firm has grown through acquisitions; historically, it has not interfered with those investment cultures. That said, Franklin's struggles with outflows in recent years have led to some changes. The firm launched several customised "LibertyQ" ETFs starting in 2016. While many active managers have taken steps to attract investors who favour cheaper, more-passive options, Franklin also launched single-country equity ETFs, an odd fit in its fund lineup. The firm also made changes to investment team leadership, including the 2017 creation of the FT Investment Solutions Group headed by longtime Franklin Income portfolio manager Ed Perks and the appointments of Templeton's Stephen Dover to head of equities and risk team veteran Mat Gulley to head of alternatives. It combined some value-equity investment personnel under the Mutual Series boutique, and the firm has emphasised centralised risk management owing to the struggles of some of its flagship funds. These changes are sensible, and the firm has some strong offerings globally, including its India- and UK-based equity funds. Given the magnitude of the changes and the longer-term struggles of much of its US equity, US taxable, and emerging-markets equity fund lineup, however, the firm's Parent rating remains Neutral. Changes afoot. 2018-10-29T07:07:00 2018-10-29T12:07:00Z The fund's performance in the recent times has been below expectation. The fund's relatively mediocre performance on few occasions in the recent times has not augured well for the fund and its long-term performance. In 2017, the fund delivered third-quartile performance. While exposure to few healthcare stocks didn't fare well, investments in some select stocks such as Tata Motors and Amara Raja Batteries, among others, dragged its performance down. On a broader basis, R. Janakiraman's strategy of staying away from momentum stocks and his quality and valuation focus was also out of favour. The fund has been going through a rough patch once again this year. While stocks related to consumption demand such as auto, retail, and lodging haven't performed well, Janakiraman's investments that are linked to the economic and infra growth such as cement, engineering, and capital goods companies also struggled. In addition to that, his investment in few select stocks such as Yes bank, Karur Vysya bank, Rapco Home Finance, and Vodafone Idea among others also added to its underperformance. This recent track record has dented the fund's performance over the three- as well as five-year period relative to category peers. However, under Janakiraman (February 2011 - November 2019), the fund clocked an annualised 16% return outperforming 82% of the category peers. Moreover, despite intermittent hiccups, his liking for higher-quality companies has helped keep the fund's volatility below average. It's critical to evaluate expenses, as they come directly out of returns. The share class on this report levies a fee that ranks in its Morningstar category's second-cheapest quintile. Based on our assessment of the fund's People, Process and Parent pillars in the context of these fees, we think this share class will be able to deliver positive alpha relative to the category benchmark index, explaining its Morningstar Analyst Rating of Silver. F00000Z803 A promising fund for risk-taking investors. Small/micro-cap funds tend to be extremely volatile with dramatic ups and downs depending on market conditions and the investment strategy with which they are run. But Franklin India Smaller Companies Fund has put up appealing results since manager R. Janakiraman took over its reins in February 2011. Under him, the fund has outperformed 82% of its category peers on returns and 91% on Morningstar Risk-Adjusted Returns front. It ranks comfortably in the category's top quartile over the managers' tenure, with relatively lesser volatility. Being a designated small/mid-cap specialist with the fund house, Janakiraman is conversant with the risks associated with investing in this segment. Intensive research therefore forms the core of his investment approach. Given the fund's mandate is to invest predominantly in small-cap stocks, Janakiraman places more emphasis on due diligence of the company before investing. The focus is on investing in quality companies with low leverage, healthy returns on equity, free cash flows, and consistent growth possibilities. He avoids companies that don't have an established track record. For liquidity management, Janakiraman invests around 15% of the portfolio in large-cap stocks and up to 10% in cash. That said, small/micro-caps are tricky beasts and the risks of running such funds are magnified during unfavourable market conditions. For instance, the fund can experience bouts of extreme volatility during market downturns and may witness a prolonged underperformance when the small-cap segment hits a rough patch. Its underperformance this year is a case in point. Further, the fund has grown steadily as it has continued to rack up solid returns and attracted flows. Going ahead, the increasing asset size may pose a challenge for the manager. We would like to see the asset-management company taking steps to restrict flows in the fund when it starts facing capacity constraints. Having said that, we draw confidence from Janakiraman's focussed approach and skilled execution capabilities. He appears at home with his investing style and has been fairly disciplined in his approach. Hence, the fund's attractive traits continue to merit a Morningstar Analyst Rating of Silver. 737 Publicly traded but family managed, Franklin Resources BEN is parent to Franklin Templeton Investments. A global asset manager with USD 734 billion in assets (as of July 2018), the firm has grown through acquisitions; historically, it has not interfered with those investment cultures. That said, Franklin's struggles with outflows in recent years have led to some changes. The firm launched several customised "LibertyQ" ETFs starting in 2016. While many active managers have taken steps to attract investors who favour cheaper, more-passive options, Franklin also launched single-country equity ETFs, an odd fit in its fund lineup. The firm also made changes to investment team leadership, including the 2017 creation of the FT Investment Solutions Group headed by longtime Franklin Income portfolio manager Ed Perks and the appointments of Templeton's Stephen Dover to head of equities and risk team veteran Mat Gulley to head of alternatives. It combined some value-equity investment personnel under the Mutual Series boutique, and the firm has emphasised centralised risk management owing to the struggles of some of its flagship funds. These changes are sensible, and the firm has some strong offerings globally, including its India- and UK-based equity funds. Given the magnitude of the changes and the longer-term struggles of much of its US equity, US taxable, and emerging-markets equity fund lineup, however, the firm's Parent rating remains Neutral. Changes afoot. 2018-10-29T07:07:00 2018-10-29T12:07:00Z The fund's performance in the recent times has been below expectation. The fund's relatively mediocre performance on few occasions in the recent times has not augured well for the fund and its long-term performance. In 2017, the fund delivered third-quartile performance. While exposure to few healthcare stocks didn't fare well, investments in some select stocks such as Tata Motors and Amara Raja Batteries, among others, dragged its performance down. On a broader basis, R. Janakiraman's strategy of staying away from momentum stocks and his quality and valuation focus was also out of favour. The fund has been going through a rough patch once again this year. While stocks related to consumption demand such as auto, retail, and lodging haven't performed well, Janakiraman's investments that are linked to the economic and infra growth such as cement, engineering, and capital goods companies also struggled. In addition to that, his investment in few select stocks such as Yes bank, Karur Vysya bank, Rapco Home Finance, and Vodafone Idea among others also added to its underperformance. This recent track record has dented the fund's performance over the three- as well as five-year period relative to category peers. However, under Janakiraman (February 2011 - November 2019), the fund clocked an annualised 16% return outperforming 82% of the category peers. Moreover, despite intermittent hiccups, his liking for higher-quality companies has helped keep the fund's volatility below average. It's critical to evaluate expenses, as they come directly out of returns. The share class on this report levies a fee that ranks in its Morningstar category's middle quintile. That's not great, but based on our assessment of the fund's People, Process and Parent pillars in the context of these fees, we think this share class will still be able to deliver positive alpha relative to the category benchmark index, explaining its Morningstar Analyst Rating of Silver. F0GBR06SI3 A promising fund for risk-taking investors. Small/micro-cap funds tend to be extremely volatile with dramatic ups and downs depending on market conditions and the investment strategy with which they are run. But Franklin India Smaller Companies Fund has put up appealing results since manager R. Janakiraman took over its reins in February 2011. Under him, the fund has outperformed 82% of its category peers on returns and 91% on Morningstar Risk-Adjusted Returns front. It ranks comfortably in the category's top quartile over the managers' tenure, with relatively lesser volatility. Being a designated small/mid-cap specialist with the fund house, Janakiraman is conversant with the risks associated with investing in this segment. Intensive research therefore forms the core of his investment approach. Given the fund's mandate is to invest predominantly in small-cap stocks, Janakiraman places more emphasis on due diligence of the company before investing. The focus is on investing in quality companies with low leverage, healthy returns on equity, free cash flows, and consistent growth possibilities. He avoids companies that don't have an established track record. For liquidity management, Janakiraman invests around 15% of the portfolio in large-cap stocks and up to 10% in cash. That said, small/micro-caps are tricky beasts and the risks of running such funds are magnified during unfavourable market conditions. For instance, the fund can experience bouts of extreme volatility during market downturns and may witness a prolonged underperformance when the small-cap segment hits a rough patch. Its underperformance this year is a case in point. Further, the fund has grown steadily as it has continued to rack up solid returns and attracted flows. Going ahead, the increasing asset size may pose a challenge for the manager. We would like to see the asset-management company taking steps to restrict flows in the fund when it starts facing capacity constraints. Having said that, we draw confidence from Janakiraman's focussed approach and skilled execution capabilities. He appears at home with his investing style and has been fairly disciplined in his approach. Hence, the fund's attractive traits continue to merit a Morningstar Analyst Rating of Silver. 737 Publicly traded but family managed, Franklin Resources BEN is parent to Franklin Templeton Investments. A global asset manager with USD 734 billion in assets (as of July 2018), the firm has grown through acquisitions; historically, it has not interfered with those investment cultures. That said, Franklin's struggles with outflows in recent years have led to some changes. The firm launched several customised "LibertyQ" ETFs starting in 2016. While many active managers have taken steps to attract investors who favour cheaper, more-passive options, Franklin also launched single-country equity ETFs, an odd fit in its fund lineup. The firm also made changes to investment team leadership, including the 2017 creation of the FT Investment Solutions Group headed by longtime Franklin Income portfolio manager Ed Perks and the appointments of Templeton's Stephen Dover to head of equities and risk team veteran Mat Gulley to head of alternatives. It combined some value-equity investment personnel under the Mutual Series boutique, and the firm has emphasised centralised risk management owing to the struggles of some of its flagship funds. These changes are sensible, and the firm has some strong offerings globally, including its India- and UK-based equity funds. Given the magnitude of the changes and the longer-term struggles of much of its US equity, US taxable, and emerging-markets equity fund lineup, however, the firm's Parent rating remains Neutral. Changes afoot. 2018-10-29T07:07:00 2018-10-29T12:07:00Z The fund's performance in the recent times has been below expectation. The fund's relatively mediocre performance on few occasions in the recent times has not augured well for the fund and its long-term performance. In 2017, the fund delivered third-quartile performance. While exposure to few healthcare stocks didn't fare well, investments in some select stocks such as Tata Motors and Amara Raja Batteries, among others, dragged its performance down. On a broader basis, R. Janakiraman's strategy of staying away from momentum stocks and his quality and valuation focus was also out of favour. The fund has been going through a rough patch once again this year. While stocks related to consumption demand such as auto, retail, and lodging haven't performed well, Janakiraman's investments that are linked to the economic and infra growth such as cement, engineering, and capital goods companies also struggled. In addition to that, his investment in few select stocks such as Yes bank, Karur Vysya bank, Rapco Home Finance, and Vodafone Idea among others also added to its underperformance. This recent track record has dented the fund's performance over the three- as well as five-year period relative to category peers. However, under Janakiraman (February 2011 - November 2019), the fund clocked an annualised 16% return outperforming 82% of the category peers. Moreover, despite intermittent hiccups, his liking for higher-quality companies has helped keep the fund's volatility below average. It's critical to evaluate expenses, as they come directly out of returns. The share class on this report levies a fee that ranks in its Morningstar category's middle quintile. That's not great, but based on our assessment of the fund's People, Process and Parent pillars in the context of these fees, we think this share class will still be able to deliver positive alpha relative to the category benchmark index, explaining its Morningstar Analyst Rating of Silver. F00000Z804 A promising fund for risk-taking investors. Small/micro-cap funds tend to be extremely volatile with dramatic ups and downs depending on market conditions and the investment strategy with which they are run. But Franklin India Smaller Companies Fund has put up appealing results since manager R. Janakiraman took over its reins in February 2011. Under him, the fund has outperformed 82% of its category peers on returns and 91% on Morningstar Risk-Adjusted Returns front. It ranks comfortably in the category's top quartile over the managers' tenure, with relatively lesser volatility. Being a designated small/mid-cap specialist with the fund house, Janakiraman is conversant with the risks associated with investing in this segment. Intensive research therefore forms the core of his investment approach. Given the fund's mandate is to invest predominantly in small-cap stocks, Janakiraman places more emphasis on due diligence of the company before investing. The focus is on investing in quality companies with low leverage, healthy returns on equity, free cash flows, and consistent growth possibilities. He avoids companies that don't have an established track record. For liquidity management, Janakiraman invests around 15% of the portfolio in large-cap stocks and up to 10% in cash. That said, small/micro-caps are tricky beasts and the risks of running such funds are magnified during unfavourable market conditions. For instance, the fund can experience bouts of extreme volatility during market downturns and may witness a prolonged underperformance when the small-cap segment hits a rough patch. Its underperformance this year is a case in point. Further, the fund has grown steadily as it has continued to rack up solid returns and attracted flows. Going ahead, the increasing asset size may pose a challenge for the manager. We would like to see the asset-management company taking steps to restrict flows in the fund when it starts facing capacity constraints. Having said that, we draw confidence from Janakiraman's focussed approach and skilled execution capabilities. He appears at home with his investing style and has been fairly disciplined in his approach. Hence, the fund's attractive traits continue to merit a Morningstar Analyst Rating of Silver. 737 Publicly traded but family managed, Franklin Resources BEN is parent to Franklin Templeton Investments. A global asset manager with USD 734 billion in assets (as of July 2018), the firm has grown through acquisitions; historically, it has not interfered with those investment cultures. That said, Franklin's struggles with outflows in recent years have led to some changes. The firm launched several customised "LibertyQ" ETFs starting in 2016. While many active managers have taken steps to attract investors who favour cheaper, more-passive options, Franklin also launched single-country equity ETFs, an odd fit in its fund lineup. The firm also made changes to investment team leadership, including the 2017 creation of the FT Investment Solutions Group headed by longtime Franklin Income portfolio manager Ed Perks and the appointments of Templeton's Stephen Dover to head of equities and risk team veteran Mat Gulley to head of alternatives. It combined some value-equity investment personnel under the Mutual Series boutique, and the firm has emphasised centralised risk management owing to the struggles of some of its flagship funds. These changes are sensible, and the firm has some strong offerings globally, including its India- and UK-based equity funds. Given the magnitude of the changes and the longer-term struggles of much of its US equity, US taxable, and emerging-markets equity fund lineup, however, the firm's Parent rating remains Neutral. Changes afoot. 2018-10-29T07:07:00 2018-10-29T12:07:00Z The fund's performance in the recent times has been below expectation. The fund's relatively mediocre performance on few occasions in the recent times has not augured well for the fund and its long-term performance. In 2017, the fund delivered third-quartile performance. While exposure to few healthcare stocks didn't fare well, investments in some select stocks such as Tata Motors and Amara Raja Batteries, among others, dragged its performance down. On a broader basis, R. Janakiraman's strategy of staying away from momentum stocks and his quality and valuation focus was also out of favour. The fund has been going through a rough patch once again this year. While stocks related to consumption demand such as auto, retail, and lodging haven't performed well, Janakiraman's investments that are linked to the economic and infra growth such as cement, engineering, and capital goods companies also struggled. In addition to that, his investment in few select stocks such as Yes bank, Karur Vysya bank, Rapco Home Finance, and Vodafone Idea among others also added to its underperformance. This recent track record has dented the fund's performance over the three- as well as five-year period relative to category peers. However, under Janakiraman (February 2011 - November 2019), the fund clocked an annualised 16% return outperforming 82% of the category peers. Moreover, despite intermittent hiccups, his liking for higher-quality companies has helped keep the fund's volatility below average. It's critical to evaluate expenses, as they come directly out of returns. The share class on this report levies a fee that ranks in its Morningstar category's second-cheapest quintile. Based on our assessment of the fund's People, Process and Parent pillars in the context of these fees, we think this share class will be able to deliver positive alpha relative to the category benchmark index, explaining its Morningstar Analyst Rating of Silver. F00000PDY5 A promising fund for risk-taking investors. Small/micro-cap funds tend to be extremely volatile with dramatic ups and downs depending on market conditions and the investment strategy with which they are run. But Franklin India Smaller Companies Fund has put up appealing results since manager R. Janakiraman took over its reins in February 2011. Under him, the fund has outperformed 82% of its category peers on returns and 91% on Morningstar Risk-Adjusted Returns front. It ranks comfortably in the category's top quartile over the managers' tenure, with relatively lesser volatility. Being a designated small/mid-cap specialist with the fund house, Janakiraman is conversant with the risks associated with investing in this segment. Intensive research therefore forms the core of his investment approach. Given the fund's mandate is to invest predominantly in small-cap stocks, Janakiraman places more emphasis on due diligence of the company before investing. The focus is on investing in quality companies with low leverage, healthy returns on equity, free cash flows, and consistent growth possibilities. He avoids companies that don't have an established track record. For liquidity management, Janakiraman invests around 15% of the portfolio in large-cap stocks and up to 10% in cash. That said, small/micro-caps are tricky beasts and the risks of running such funds are magnified during unfavourable market conditions. For instance, the fund can experience bouts of extreme volatility during market downturns and may witness a prolonged underperformance when the small-cap segment hits a rough patch. Its underperformance this year is a case in point. Further, the fund has grown steadily as it has continued to rack up solid returns and attracted flows. Going ahead, the increasing asset size may pose a challenge for the manager. We would like to see the asset-management company taking steps to restrict flows in the fund when it starts facing capacity constraints. Having said that, we draw confidence from Janakiraman's focussed approach and skilled execution capabilities. He appears at home with his investing style and has been fairly disciplined in his approach. Hence, the fund's attractive traits continue to merit a Morningstar Analyst Rating of Silver. 737 Publicly traded but family managed, Franklin Resources BEN is parent to Franklin Templeton Investments. A global asset manager with USD 734 billion in assets (as of July 2018), the firm has grown through acquisitions; historically, it has not interfered with those investment cultures. That said, Franklin's struggles with outflows in recent years have led to some changes. The firm launched several customised "LibertyQ" ETFs starting in 2016. While many active managers have taken steps to attract investors who favour cheaper, more-passive options, Franklin also launched single-country equity ETFs, an odd fit in its fund lineup. The firm also made changes to investment team leadership, including the 2017 creation of the FT Investment Solutions Group headed by longtime Franklin Income portfolio manager Ed Perks and the appointments of Templeton's Stephen Dover to head of equities and risk team veteran Mat Gulley to head of alternatives. It combined some value-equity investment personnel under the Mutual Series boutique, and the firm has emphasised centralised risk management owing to the struggles of some of its flagship funds. These changes are sensible, and the firm has some strong offerings globally, including its India- and UK-based equity funds. Given the magnitude of the changes and the longer-term struggles of much of its US equity, US taxable, and emerging-markets equity fund lineup, however, the firm's Parent rating remains Neutral. Changes afoot. 2018-10-29T07:07:00 2018-10-29T12:07:00Z The fund's performance in the recent times has been below expectation. The fund's relatively mediocre performance on few occasions in the recent times has not augured well for the fund and its long-term performance. In 2017, the fund delivered third-quartile performance. While exposure to few healthcare stocks didn't fare well, investments in some select stocks such as Tata Motors and Amara Raja Batteries, among others, dragged its performance down. On a broader basis, R. Janakiraman's strategy of staying away from momentum stocks and his quality and valuation focus was also out of favour. The fund has been going through a rough patch once again this year. While stocks related to consumption demand such as auto, retail, and lodging haven't performed well, Janakiraman's investments that are linked to the economic and infra growth such as cement, engineering, and capital goods companies also struggled. In addition to that, his investment in few select stocks such as Yes bank, Karur Vysya bank, Rapco Home Finance, and Vodafone Idea among others also added to its underperformance. This recent track record has dented the fund's performance over the three- as well as five-year period relative to category peers. However, under Janakiraman (February 2011 - November 2019), the fund clocked an annualised 16% return outperforming 82% of the category peers. Moreover, despite intermittent hiccups, his liking for higher-quality companies has helped keep the fund's volatility below average. It's critical to evaluate expenses, as they come directly out of returns. The share class on this report levies a fee that ranks in its Morningstar category's middle quintile. That's not great, but based on our assessment of the fund's People, Process and Parent pillars in the context of these fees, we think this share class will still be able to deliver positive alpha relative to the category benchmark index, explaining its Morningstar Analyst Rating of Silver. F0GBR06SI2 Live