Five Funds, One Portfolio: How to Measure Mutual Fund Overlap
A common portfolio: five equity mutual funds, chosen at different times, from different fund houses, on different recommendations. It feels diversified. Five funds, five managers, five names.
It may be close to one fund with five expense ratios. Whether it is depends on a number nobody usually calculates.
Counting names is the wrong measure
Most overlap tools tell you how many stocks two funds share. "These funds have 18 holdings in common" sounds informative and is nearly useless.
Consider two pairs of funds:
Pair A shares eighteen holdings, each 0.2% of both portfolios. Pair B shares two holdings: 9% Reliance and 8% HDFC Bank in both.
By the counting method, Pair A is nine times more overlapped. In reality:
- Pair A has 3.6% of its money in the same places.
- Pair B has 17%.
The counting method ranks these exactly backwards, because it treats a 0.2% position and a 9% position as the same event.
The measure that works: shared weight
The honest calculation is the sum of the smaller weight across every shared holding.
If fund A holds 9% Reliance and fund B holds 7%, then 7% of both portfolios is doing the same thing. Add that up across every company both funds own, and you have the fraction of your money making the same bet twice.
| Holding | Fund A | Fund B | Counts as |
|---|---|---|---|
| HDFC Bank | 8.90% | 9.60% | 8.90% |
| Reliance | 9.00% | 7.00% | 7.00% |
| Infosys | 4.10% | 5.80% | 4.10% |
| ITC | 4.70% | 3.10% | 3.10% |
| Overlap | 23.10% |
The measure is 100% for identical portfolios and 0% for entirely separate ones. Everything in between is a fact about how much duplication you are actually carrying.
You can run this on any two funds we hold portfolios for with the overlap calculator.
Match on ISIN, never on name
One technical point that changes the answer materially.
The same company appears in fund disclosures as "Reliance Industries Ltd", "Reliance Industries Limited" and "RELIANCE INDUSTRIES LTD." — three spellings, one company. A tool matching on the company name reports two funds holding the same stock as holding different stocks.
That error runs in the dangerous direction. It makes a portfolio look more diversified than it is, which is precisely the mistake you were trying to check for. Every holding carries an ISIN — a unique twelve-character identifier — and that is the only reliable key.
Two things that are not overlap
Cash is not a shared bet. Every equity fund parks a few percent in TREPS, repo and net receivables overnight. Two funds both holding 3% in TREPS are not making a shared investment decision, and counting it adds roughly the same few points to every comparison you ever run. It should be excluded and reported separately.
Government securities are a harder case. Two funds holding the same 7.26% GOI 2033 genuinely do have that money in the same instrument, so excluding it understates the duplication — and for two gilt funds, the shared paper is the entire comparison. But two equity funds colliding in the sovereign market are not sharing a view on any business, and the universe is small enough that they collide by default.
The right treatment is to count it and say so. A comparison reading "57% overlap" means something very different when 23 of those points are government bonds — the shared company ownership is 34%, and that is the figure that describes overlapping stock selection.
What the number means, and what it does not
High overlap is not a verdict on either fund.
Two large-cap funds will overlap heavily because SEBI defines large-cap as the top 100 companies by market capitalisation. There are only a hundred names available; any two managers working from the same hundred will land on many of the same ones. That is a fact about the category, not evidence that either manager is doing anything wrong.
What the number does tell you is how much diversification you are actually buying. If two funds overlap 75%, the second one is adding a quarter of what its size suggests — while you pay its expense ratio on the whole amount. Whether that is a problem depends on why you hold both.
It is also worth checking concentration alongside overlap: what share of a single fund sits in its largest ten holdings. A fund whose top ten are 70% behaves very differently from one whose top ten are 25%, and neither the category name nor the mandate reveals which you own. Every scheme page on this site shows both, taken from the fund's own monthly disclosure.
The practical version
- Take the two funds in your portfolio with the most similar mandates — two flexi caps, two large caps.
- Run the overlap.
- If it is above 70%, the second fund is adding very little that the first does not already give you.
- Repeat for the next-closest pair.
You are not looking for a target number. You are looking for the cases where you believed you had two positions and actually have one.
A caveat about the data
Portfolios are disclosed monthly and with a lag. Every overlap figure describes a month that has ended rather than what the funds hold today, and two disclosures from different months are a comparison of two moments as much as of two funds. Any tool worth using tells you the disclosure date it computed from.
GrowIQ Capital is an AMFI-registered mutual fund distributor (ARN-352082), not a SEBI Registered Investment Adviser. Nothing here is a recommendation to buy, sell or hold any scheme, and no fund is rated or ranked. Mutual fund investments are subject to market risks; read all scheme related documents carefully.