Mutual Fund Overlap: Why Three Funds Can Be One Bet in Disguise
6 min read
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6 min read
You own three equity mutual funds. Three names, three fund managers, three monthly statements. It feels like diversification.
Now open each fund's top holdings. Chances are the same banks keep showing up.
That is mutual fund overlap. Different funds, same stocks underneath. In this post you will see a simple Rupiah example, a way to put a number on overlap, and a five-minute check for your own funds.
A mutual fund pools money from many people and buys a basket of stocks. When you own a fund, you indirectly own a slice of every stock in that basket.
Overlap happens when two funds hold many of the same stocks. Your real exposure to those companies is then bigger than the number of funds suggests. A fund name tells you the style. It does not tell you what is inside.
This is common in Indonesia. A few large companies, mostly big banks, make up a big share of the main index. Many equity funds end up holding the same names.
A top-10 holdings list shows the ten largest positions in a fund, each with its weight. Weight means the share of the fund's money in that stock. A weight of 12% means Rp12 of every Rp100 in the fund sits in that one stock.
Funds publish this in a monthly document called the fund fact sheet. Per Bareksa and Bisnis.com reporting from June 2020, an OJK official said open-ended mutual funds are required to disclose their top 10 securities. Both reports are from 2020, so check a current fact sheet for the exact layout. We could not open the OJK rule text itself.
You only need this one page per fund to spot overlap.
Here is NetWort arithmetic with made-up funds. These are not real products and the weights are invented to show the idea. To keep it short, each fund shows its top 5 only.
| Stock | Fund A | Fund B | Fund C |
|---|---|---|---|
| BBCA | 12% | 11% | 10% |
| BBRI | 10% | 9% | 12% |
| BMRI | 8% | 7% | 9% |
| TLKM | 6% | n/a | 5% |
| ASII | 4% | 5% | n/a |
| BBNI | n/a | 4% | 4% |
The funds look different. One has Telkom, one has Astra, one has BNI. But the first three rows are nearly the same in all three.
Here is a simple way. For each stock two funds share, take the smaller weight. Add them up. That total is the overlap percentage.
For Fund A and Fund B:
Total: 11 + 9 + 7 + 4 = 31%.
Doing the same for the other pairs gives 33% for A and C, and 30% for B and C. Remember this only counts the top 5. The real overlap, with all holdings, is at least this high.
Some Indian fund sites suggest a rough guide: under 30% is fine, above 50% means you hold nearly the same thing twice. That is commentary from fund companies in another market, not a rule. Use it as a feeling for scale, not a pass or fail test.
Say you put Rp10 juta in each fund, Rp30 juta in total. Add up each bank across the three funds:
Three banks hold Rp8,8 juta of your Rp30 juta. That is about 29% of everything, from just three stocks, spread over three funds.
If big banks have a bad month, all three funds feel it together. You did not spread the risk. You paid three times to hold one idea.
First, concentration risk. This is the risk of too much money in too few things. We cover it in our guide to portfolio concentration risk.
Second, fees. Every fund charges a management fee. If two funds hold much the same stocks, you pay two fees for one exposure. Small fees add up over years, as shown in how mutual fund fees eat long-term returns.
Zero overlap is not the goal. Big companies are big for a reason, and any equity fund will hold some of them.
A broad index fund and a bond fund overlap on almost nothing, which is the point of owning both. The concern is when funds that claim to be different hold the same top stocks. For a deeper look at how many independent bets you really own, see the effective number of bets.
If one stock or one sector keeps growing in that sum, that is your hidden bet.
Open your Holdings page on NetWort and add the funds and stocks you own in one place. Then compare the top 10 list of each fund against your direct stock holdings. You may be holding BBCA twice and not know it. To see how that one stock has moved, open the BBCA asset page.