While large caps continue to be safe haven for investors and are hitting new highs, mid caps are yet to show any significant growth after the big correction from their peak seen at the beginning of last year. One must remember that mid caps have the potential to be the large caps of tomorrow and can reward investors with high growth. A simple diversification across large caps and midcaps can thus offer the benefit of safety as well as high growth.

Mirae Asset Emerging Bluechip Fund (MAEBF) is one such large & mid cap fund that seeks to discover future growth potential of emerging mid-sized companies that are capable of becoming the bluechips of tomorrow.

MAEBF is currently the largest fund in its category, with a corpus of Rs 8,219 crore under management. It is managed by Mr Neelesh Surana since inception while Mr Ankit Jain joined in January 2019.

Graph 1: Growth of Rs 10,000 if invested in Mirae Asset Emerging Bluechip Fund 5 years ago

Graph 1: Growth of Rs 10,000 if invested in Mirae Asset Emerging Bluechip Fund 5 years ago

Data as on November 04, 2019
(Source: ACE MF)

Belonging to a process driven fund house, MAEBF showcased exemplary performance in the last five years. An investment of Rs 10,000 in MAEBF five years back on November 04, 2014, would now be worth Rs 22,549 (as calculated on November 04, 2019). This translates into compounded annualised growth rate of 17.66%. In comparison, a simultaneous investment of Rs 10,000 in its benchmark Nifty LargeMidcap 250 – TRI would now be worth Rs 16,204 (a CAGR of 10.14%). As can be seen in the chart alongside, the fund has generated remarkable lead over the index in the last five years.

Graph 2: Mirae Asset Emerging Bluechip Fund year-on-year performance

Graph 2: Mirae Asset Emerging Bluechip Fund year-on-year performance

 *YTD as on November 04, 2019
(Source: ACE MF)

Launched in July 2010, MAEBF has track record of over nine years to its credit. The year-on-year performance comparison of MAEBF vis-à-vis its benchmark Nifty LargeMidcap 250 – TRI shows that the fund outpaced the index in all last nine calendar years, excluding CY 2018 where it trailed slightly with performance nearly in line with the benchmark. The outperformance has been with a significant margin in all the calendar years. The fund continues to deliver superior returns over benchmark in the current year as well.

Table: Mirae Asset Emerging Bluechip Fund performance vis-a-vis category peers

Scheme Name Corpus (Cr.) 1 year (%) 2 year (%) 3 year (%) 5 year (%) Std Dev Sharpe
Mirae Asset Emerging Bluechip Fund 8,219 4.55 10.69 17.57 23.67 15.12 0.09
LIC MF Large & Midcap Fund 548 0.18 8.46 15.09 NA 14.27 0.07
Invesco India Growth Opp Fund 1,822 2.71 12.33 14.95 16.08 13.37 0.13
Sundaram Large and Mid Cap Fund 794 3.20 11.15 14.81 16.04 14.04 0.11
Canara Rob Emerging Equities Fund 4,980 -2.11 8.39 14.78 22.06 16.33 0.05
Principal Emerging Bluechip Fund 2,199 -5.45 6.30 13.82 19.49 16.00 0.02
Essel Large & Midcap Fund 106 2.17 7.20 13.49 NA 14.83 0.04
Kotak Equity Opportunities Fund 2,614 2.26 7.49 13.19 15.72 13.27 0.04
IDFC Core Equity Fund 2,817 -2.31 6.76 12.84 13.23 13.99 0.02
DSP Equity Opportunities Fund 5,489 -0.56 6.71 12.83 15.41 14.37 0.04
Edelweiss Large & Mid Cap Fund 456 1.10 10.01 11.78 13.59 13.46 0.07
SBI Large & Midcap Fund 2,659 1.07 8.47 11.20 14.84 13.99 0.01
Tata Large & Mid Cap Fund 1,455 4.46 8.25 11.12 14.36 12.95 0.04
ICICI Pru Large & Mid Cap Fund 3,614 -0.62 5.30 11.02 11.36 12.58 0.00
L&T Large and Midcap Fund 1,341 -6.64 4.24 10.25 12.78 14.80 0.00
Aditya Birla SL Equity Advantage Fund 4,900 -5.73 2.92 10.04 15.24 16.18 -0.02
Quant Large & Mid Cap Fund 4 -4.03 2.40 9.56 17.90 13.18 -0.04
HDFC Growth Opportunities Fund 1,283 -0.18 5.54 9.01 7.83 13.74 0.00
Franklin India Equity Advantage Fund 2,565 -2.12 5.38 8.48 12.83 12.98 -0.03
UTI Core Equity Fund 854 -4.32 4.28 8.35 10.64 13.87 -0.06
BOI AXA Large & Mid Cap Equity Fund 167 -9.48 3.43 7.90 9.56 16.80 -0.01
Nippon India Vision Fund 2,758 -6.62 1.21 6.96 10.75 16.76 -0.04
Nifty LargeMidcap 250 Index – TRI -1.82 7.92 12.57 14.31 14.78 0.02

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 November 04, 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.

MAEBF outpaced the benchmark and category average across rolling periods with an impressive margin. Its return in the 1-year rolling period is noteworthy as the benchmark and many category peers failed to generate positive returns. During the 5-year rolling period the fund outmarched the benchmark and the category average by around 9 percentage points.

In fact, MAEBF was the category topper across rolling period. LIC MF Large & Midcap FundInvesco India Growth Opportunities FundSundaram Large and Mid Cap Fund and Canara Robeco Emerging Equities Fund were the other top performers in the category.

On risk-return parameters, the fund registered slightly higher volatility. However, it managed to deliver decent risk-adjusted returns.

Investment strategy of Mirae Asset Emerging Bluechip Fund

Categorised as Large & Mid cap fund, MAEBF is mandated to invest at least 35% each in equities of large cap and mid cap companies across sector, theme or investment style. Though the fund predominantly invests in large and mid caps, it also holds slight exposure to small caps to achieve optimal portfolio construction.

MAEBF invests in companies that could benefit from macro-economic, industrial and sectoral trends (top down approach) after doing bottom up analysis to assess due diligence, quality of management in terms of corporate governance and commitment to minority shareholders etc.

The fund tries to maintain a large base of stocks in the portfolio to avoid concentration risk and liquidity risk. Its investment approach is aimed at participating in high quality businesses up to a reasonable price and holding the same over an extended period of time.

Graph 3: Mirae Asset Emerging Bluechip Fund portfolio allocation and market capitalisation trend

Graph 3: Mirae Asset Emerging Bluechip Fund portfolio allocation and market capitalisation trend

 Holding (in %) as on September 30, 2019
(Source: ACE MF)

MAEBF invests predominantly in large and mid caps, though it also seeks opportunities in small cap stocks. The fund has allocated around 55% of its portfolio in large caps, up from around 50% a year ago. At the same time, its allocation to small caps is down from around 14% a year ago to around 8% presently. Its allocation to mid caps is consistent at around 35%. The fund stays fully invested in equities, while its holdings in cash and equivalents is usually within 1%.

Graph 4: Mirae Asset Emerging Bluechip Fund top portfolio holdings

Holding (in %) as on September 30, 2019
(Source: ACE MF)

MAEBF has a sizeable holding of 63 stocks diversified across various sectors as on September 30, 2019. The top 10 holdings constitute 38.5% of which five are Bank stocks. HDFC Bank has the highest allocation in the portfolio at 7.1%. This is followed by ICICI Bank (6.2%), State Bank of India (4%), Axis Bank (3.7%) and Reliance Industries (3.6%). Rest of the stocks in the top 10 holdings have allocation in the range of 2-3%.

In terms of sectors, the fund’s portfolio is majorly allocated towards cyclicals, and is fairly diversified across defensive and sensitive sectors as well. The fund is overweight on Healthcare, Consumer Cyclicals, Industrials and Basic Materials, whereas significantly underweight on Energy, Technology and Consumer Defensives.

Top contributors

Among the domestic equities in the portfolio, ICICI Bank contributed the most to the fund’s return in the last one year with a weighted return of 2%. Kotak Mahindra Bank, Vinati Organics, HDFC Bank and Info Edge (India) were the other top contributors to the portfolio gains.

On the other hand stocks Tata Steel, TVS Motor Company, Larsen & Toubro Infotech, Tata Chemicals and CEAT eroded some of its gains in the last one year.

Suitability of Mirae Asset Emerging Bluechip Fund

MAEBF has rewarded investors with superior returns over different time frames. It holds majority of its portfolio in equities of large and mid cap companies diversified across stocks and sectors. While large cap enable an element of stability with steady rise of income , mid caps have the potential to generate higher returns but the risk involved is higher. MAEBF also seeks opportunities in the very high-risk high-return small caps. The funds exposure across market caps makes it suitable for investors with high risk appetite and longer investment horizon.

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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