Understanding equity fund styles: What they mean and how investors can use them to diversify
They help investors understand how funds are structured, why performance differs, and how different strategies can complement one another.
May 2026
4 mins read
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There are more than 500 actively managed equity funds in the industry as of April 2026, spread across different categories based on market cap, sectors/themes, etc. When selecting funds for as part of equity portfolio, investors often look at diversifying across market cap like large, mid and small caps. More importantly, an overarching filter remains the past performance, which drives investors towards top performing funds.
However, performance is driven by several factors and it is essential to look at what factors drove those returns. Each fund follows a unique style of management, depending on the investment strategy, fund house style/fund manager’s style.
What is fund style or factor?
Fund styles describe the philosophy and methodology an equity mutual fund follows when selecting securities. Identifying fund styles help investors understand how returns are generated, what risks are taken, and how a fund may behave across different market conditions. This understanding is essential for constructing diversified portfolios that are resilient over time.
Growth
One of the most common ways to classify fund styles is based on how companies are evaluated. Funds that have a tilt towards ‘growth’ style invest in businesses expected to expand earnings or revenues at an above average rate. These companies often reinvest profits to fuel future expansion, and their valuations may appear higher because investors are paying for expected growth. Growth styles can perform well during periods of economic optimism but may experience sharper volatility when expectations are not met.
The vertical side depicts market cap (size) exposure while horizontal side denotes style. From the above style box, we can infer that the fund follows a growth style, tilted towards large cap.
(Source: Morningstar.in)
Value
On the other hand, ‘value-oriented’ funds focus on companies that appear undervalued relative to their fundamentals, such as earnings, cash flows, or assets. These funds seek opportunities where market prices may not fully reflect a company’s underlying strength, often due to temporary challenges or investor pessimism. Value styles tend to offer a margin of safety and may perform better when market sentiment stabilizes or reverses. For instance, value style outperformed (16.9%) other factors in CY 2025. On the other hand, momentum style delivered negative (-7.6%). (Source: Internal study)
In this case, we can see that the fund follows a value style and tilted towards large cap.
(Source: Morningstar.in)
Growth at Reasonable Price (GARP)
Between growth and value lies the GARP style, which stands for growth at a reasonable price. GARP funds aim to identify companies with solid growth prospects while avoiding excessive valuations. This approach blends elements of both growth and value investing, seeking a balance between upside potential and valuation discipline. GARP strategies are often used by investors who want growth exposure without taking on extreme valuation risk.
Quality
Quality-focused funds emphasize companies with strong balance sheets, consistent profitability, durable competitive advantages, and effective management. Rather than chasing rapid expansion or deep discounts, quality styles prioritize business resilience and long-term sustainability. In 2020 pandemic, investors shifted to safety and thus ‘quality’ style outperformed others. Quality delivered 27.6% in CY 2020. (Source: Internal study)
Fund styles also reflect how managers apply these philosophies within a broader investment process. Actively managed style funds rely on research and judgement to identify securities that best match the chosen style, while passively managed funds track/aim to replicate indices designed around specific market cap or style characteristics, such as growth, value, or quality factors. Each approach carries different implications for costs, consistency, and tracking error. Today, you also have the option to invest in smart beta strategies that focus on investing in factors such as value, growth, momentum, quality, etc.
Performance
If you look at historical trend, no single style outperforms every year. For instance in CY2021, after Covid rebound, Momentum outperformed while quality style lagged. Subsequently in 2022, value did well by delivering 23.2%. (Source: Internal Study)
What should you do
Diversification becomes more effective when you combine multiple fund styles instead of relying on a single approach. Since growth, value, GARP, and quality styles tend to lead or lag at different points in the economic and market cycle, blending them can help smooth portfolio performance over time. This reduces dependence on any one style being in favour and helps manage volatility across varying market conditions.
Summing up, while mutual funds do not specify the style followed by a fund manager/fund explicitly as they offer multiple funds managed by different fund managers, an easy way to check the fund’s style is looking at style box which are available on Morningstar and Value Research websites.
Ultimately, fund styles serve as a framework rather than a formula. They help investors understand how funds are structured, why performance differs, and how different strategies can complement one another. By thoughtfully combining growth, value, GARP, and quality styles, investors can build portfolios that are better equipped to navigate changing market environments while staying aligned with long term goals.
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PGIM India Asset Management Private Limited
(CIN - U74900MH2008FTC187029)
Toll Free Number: 1800 209 7446
Email: care@pgimindia.co.in
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MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
All the Mutual Fund investors have to go through a one-time KYC (Know Your Customers) process. Investor should deal only with the Registered Mutual Funds (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit https://www.pgimindia.com/mutual-funds/ieid.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
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