The Indian economy is showing clear signs of a slowdown. This has in turn impacted the returns on equity investments, especially in the mid and small cap category.

Large caps are better placed to handle economic shocks as these companies have strong business models and sustainable competitive advantage. These companies have the potential to grow despite challenges.

One such fund which looks to capitalise on this growth potential is Mirae Asset Large Cap Fund.

The fund was launched in April 2008 and has total asset under management of Rs 13,492 crore. MALCF was earlier known as Mirae Asset India Equity Fund and was categorised as a multi-cap fund, though it always maintained a large cap bias.

The fund is managed by Mr Neelesh Surana (since May 2008), Mr Harshad Borawake (since May 2017) and Mr Gaurav Misra (since January 2019).

Investment objective: MALCF aims to generate long term capital appreciation by capitalising on the potential investment opportunities by predominantly investing in equities of large cap companies.

Graph 1: Growth of Rs 10,000, If Invested In Mirae Asset Large Cap Fund 5 Years Ago

Had you invested Rs 10,000 in MALCF five years back on September 04, 2014, it would have grown to Rs 17,446 as on September 04, 2019. This translates into compounded annualised growth rate of 11.77%. In comparison a simultaneous investment of Rs 10,000 in its benchmark Nifty 100 – TRI would now be worth Rs 14,554 (a CAGR of 7.79%). As can be seen in the chart above, the fund generated significant lead over the benchmark in the last five years.

Graph 2: Mirae Asset Large Cap Fund Year-on-Year Performance

Launched in April 2008, the fund has a track record of over 11 years. The year-on-year performance comparison of MALCF vis-a-vis its benchmark Nifty 100 – TRI shows that the fund has performed exemplarily well over the years. It outperformed the index in all the last 10 calendar years, except in CY 2018 where it lagged the benchmark. Majority of alpha was generated in CY 2009 and CY 2014, whereas in CY 2011 it managed to cushion the downside. In the current year, the fund has generated positive returns even as the benchmark registered negative returns.

Table 1: Mirae Asset Large Cap Fund Year-on-Year Performance

Scheme Name Corpus (Cr.) 1-year (%) 2-year (%) 3-year (%) 5-year (%) Std Dev Sharpe
Mirae Asset Large Cap Fund 13,492 5.27 12.91 16.10 18.50 12.49 0.10
Axis Bluechip Fund 6,501 9.11 16.93 15.20 15.22 12.46 0.15
Reliance Large Cap Fund 12,261 5.19 12.60 14.83 16.96 14.42 0.05
HDFC Top 100 Fund 17,095 6.38 10.96 14.76 14.28 14.03 0.06
ICICI Pru Bluechip Fund 21,125 3.38 11.15 13.92 14.71 11.66 0.05
Indiabulls Blue Chip Fund 222 3.27 10.92 13.78 13.93 13.37 0.06
Canara Rob Bluechip Equity Fund 212 5.97 11.97 13.52 13.59 12.41 0.07
HSBC Large Cap Equity Fund 655 1.17 9.07 12.75 12.33 12.65 0.05
Edelweiss Large Cap Fund 158 3.90 11.89 12.63 14.05 13.01 0.05
IDFC Large Cap Fund 411 1.03 9.87 12.62 11.29 12.39 0.03
Invesco India Largecap Fund 190 3.18 10.75 12.37 15.12 11.94 0.04
Aditya Birla SL Frontline Equity Fund 20,584 0.76 8.23 11.82 14.52 12.36 -0.01
Essel Large Cap Equity Fund 104 0.04 7.74 11.60 13.24 13.28 0.01
UTI Mastershare 5,843 3.20 10.06 11.47 13.43 11.80 0.02
Tata Large Cap Fund 771 2.68 9.22 11.46 13.07 12.86 0.02
PGIM India Large Cap Fund 314 2.33 9.15 11.20 13.94 11.89 0.03
Kotak Bluechip Fund 1,303 2.23 9.04 11.16 14.28 12.64 0.01
SBI BlueChip Fund 21,585 0.27 8.04 11.02 15.80 12.73 -0.01
Sahara Super 20 Fund 0.4 1.02 8.18 10.86 10.16 12.20 -0.01
L&T India Large Cap Fund 475 2.16 8.67 10.61 12.97 12.63 0.01
NIFTY 100 – TRI 4.79 11.80 13.50 12.96 12.38 0.05

Returns are on a rolling basis and in %, calculated using Direct Plan – Growth option. Those depicted over 1-Yr are compounded annualised.
(Data as on September 05, 2019)
(Source: ACE MF)

*Please note, this table only represents the best performing funds based solely on past returns and is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. Past performance is not an indicator for future returns. The percentage returns shown are only for indicative purposes.

MALCF has outperformed average category returns and benchmark across rolling periods. The fund outpaced the average category returns and benchmark with significant margin in the 3-year and 5-year rolling period.

On a 3-year and 5-year rolling return basis, the fund stood as the category topper. Axis Bluechip Fund and Reliance Large Cap Fund were other top performers on a 3-year rolling return basis.

In terms of risk-return parameters, MALCF undertook reasonable amount of risk but has delivered superior risk-adjusted returns compared to benchmark and many category peers.

Investment Strategy of Mirae Asset Large Cap Fund

MALCF aims to generate long-term capital appreciation by capitalising on potential investment opportunities by predominantly investing in equities of large cap companies, yet it may invest up to 20% in non-large cap companies.

It has the flexibility to invest across sectors and themes. The fund aims to combine consistency of large caps with few conviction ideas across mid caps and small caps. The fund tries to identify companies which have sustainable competitive advantage and is available at reasonable price to hold it over an extended period of time.

The fund manager of the scheme follows a top down approach to invest in companies that benefit from macro economic, industry and sectoral trends after doing bottom up analysis and due diligence.

The fund may invest in equity derivatives to hedge and balance the portfolio and optimize the returns.

Graph 3: Mirae Asset Large Cap Fund Portfolio Allocation And Market Capitalisation Trend

MALCF is mandated to invest 80% of its assets in equity and equity related instruments of large cap companies. The fund allocates 82-85% of its assets towards large caps. The balance is allocated towards mid caps in the range of 8-10% and small caps in the range of 3-4%. It maintains up to 4% of its holdings in the form of cash. The fund has avoided investing in debt instruments.

Graph 4: Kotak Standard Multi-cap Fund Top Portfolio Holdings

Holdings (in %) as on July 31, 2019
(Source: ACE MF)

As on July 31, 2019, MALCF held 61 stocks in its portfolio, diversified across various sectors. The top 10 stocks constitute 47.3% of the total holdings and are mainly concentrated towards the banking sector. HDFC Bank has the highest allocation of 9% in the portfolio, followed by ICICI Bank (6.5%) and Reliance Industries (5.5%). The other stocks in the top 10 holdings have allocation in the range of 3-4% each.

In terms of sector wise holdings, the fund has the maximum exposure to Banks at 29.6%. Infotech and Consumer Non Durables have the next highest allocation with exposure of 10.1% and 9.3%, respectively. Petroleum Products (7.5%), Pharmaceuticals (6.7%) and Finance (6.6%) follow closely behind. The other prominent sectors in the portfolio are Engineering, Auto, Power and Consumer Durables.

Suitability of Mirae Asset Large Cap Fund

MALCF is a large cap fund investing across sectors and themes. It aims to maximise long term capital appreciation by finding investment opportunities resulting from Indian economic growth and structural shifts through investments in equity and equity related instruments with risk mitigation and control measures.

Over 90% of the fund’s holding is invested in equities with majority of it allocated towards large-caps. It also looks to tap opportunities in mid and small-caps. Thus, the fund has the potential to appreciate wealth with an element of stability, making it suitable for moderately high risk takers with an investment horizon of 5 years or more.

The fund has rewarded investors by performing exceptionally well across periods and delivering significant alpha over the benchmark and many of its category peers.

Before investing you must weigh all the options and make a prudent choice. The scheme should match your risk profile and should be suitable to meet your investment goals as per the set time period.

Note: This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

This article first appeared on PersonalFN here.

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