The equity market has started showing upward trend since the beginning of April. However, I am of the view that there could be more volatility in store ahead. The credit crisk in India has heightened, business operations are at risk, demand is slowing and there is a possibility of sharp contraction in GDP. All of these could show its impact on the equities in the coming months.
Hence, it becomes necessary to stick to funds that offer diversification across market capitalisation and sectors so that it can perform well across market phases and cycles.
Mirae Asset Emerging Bluechip Fund (MAEBF) is one such fund in the large & mid cap fund category that holds a well-diversified portfolio of stocks and sectors and have rewarded investors in the past with superior risk-adjusted returns.
Graph 1: Growth of Rs 10,000 if invested in Mirae Asset Emerging Equities Fund 5 years ago
Data as on April 20, 2020
(Source: ACE MF, PersonalFN Research)
MAEBF is known for its cautious investment approach that has helped deliver superior risk-adjusted returns to its investors. If you had invested Rs 10,000 in MAEBF five years ago on April 20, 2015, it would have grown to Rs 16,717 now (as calculated on April 20, 2020). In comparison a simultaneous investment of Rs 10,000 in its benchmark Nifty LargeMidcap 250 – TRI would now be worth Rs 12,143. Over the last five years MAEBF has grown at a CAGR of 10.8% which is close to 7 percentage point CAGR higher than the benchmark. The fund’s strategy to look for high growth stocks across large and mid cap space available at fair and attractive valuations helped it generate significant lead over the benchmark.
Table: Mirae Asset Emerging Equities Fund’s performance vis-a-vis category peers
| Scheme Name | 1-year (%) | 3-year (%) | 5-year (%) | Std Dev | Sharpe |
| Invesco India Growth Opp Fund | -14.76 | 3.98 | 6.21 | 18.78 | -0.02 |
| Mirae Asset Emerging Bluechip | -11.72 | 3.21 | 10.81 | 20.04 | -0.02 |
| Edelweiss Large & Mid Cap Fund | -12.45 | 2.95 | 4.70 | 18.39 | -0.03 |
| Tata Large & Mid Cap Fund | -12.50 | 1.10 | 4.80 | 18.51 | -0.07 |
| Kotak Equity Opp Fund | -13.56 | 0.83 | 6.15 | 19.11 | -0.06 |
| Canara Rob Emerg Equities Fund | -13.38 | 0.71 | 7.97 | 20.34 | -0.04 |
| LIC MF Large & Midcap Fund | -13.07 | 0.69 | 6.46 | 19.08 | -0.03 |
| Sundaram Large and Mid Cap Fund | -18.62 | 0.52 | 4.97 | 20.50 | -0.04 |
| BOI AXA Large & Mid Cap Equity Fund | -10.98 | -0.20 | 2.31 | 20.83 | -0.07 |
| DSP Equity Opportunities Fund | -16.04 | -0.40 | 5.55 | 19.81 | -0.08 |
| Category Average | -16.84 | -0.99 | 3.99 | 22.56 | -0.14 |
| Benchmark | -20.59 | 1.48 | 3.96 | 20.32 | -0.09 |
Returns are points to point and in %, calculated using Direct Plan – Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on April 20, 2020
(Source: ACE MF, PersonalFN Research)
*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 is one of those funds that have constantly made it to the list of top quartile performers. Its outperformance and the ability to generate alpha is clearly visible across periods.
Over the long term time horizon of 5 years, MAEBF outpaced the benchmark and category average by close to 7 percentage points. Some of the other top performers in the category include Invesco India Growth Opportunities Fund, Kotak Equity Opportunities Fund and Canara Rob Emerging Equities Fund.
MAEBF’s volatility (standard deviation) is competitive to its peers and the benchmark, but it more than compensates its investors in the form of superior risk-adjusted returns. Its Sharpe ratio is commendable, and is the highest in the category.
Investment strategy of Mirae Asset Emerging Equities Fund
Categorised as large & mid cap fund, MAEBF is mandated to invest minimum 35% each in equity and equity related instruments of large and mid-sized companies. The fund usually holds around 55% of its assets in large caps and around 45% in mid and small caps. Its cash balance has been below 1% in most months.
While picking stocks for the portfolio, MAEBF aims to hold a well-diversified portfolio without having any bias towards any particular theme, sector or style. Following a mix of top down and bottom up approach to investing, the fund management broadly analyses the macro economy and invest in stocks of high-growth companies likely to benefit from macroeconomic, sectoral and industry trends. The fund manager looks for long-term investment opportunities in stocks of high quality businesses that are available at reasonable prices and follows buy and hold investment strategy until its full potential is derived.
Graph 2: Top portfolio holdings in Mirae Asset Emerging Equities Fund
Holding in (%) as on March 31, 2020
(Source: Portfolio disclosure – Mirae Asset Mutual Fund)
MAEBF holds a portfolio of around 60 stocks spread across market capitalisation. Large cap names like HDFC Bank, ICICI Bank, Reliance Industries, Axis Bank and SBI appear among its top holdings. Notably, the fund’s portfolio is not skewed to a set of stocks — the top 30 stocks have an exposure ranging between 2-7%.
Banks dominate MAEBF’s portfolio with an allocation of around 25%. Finance stocks account for another 7% in the portfolio. Some of the other prominent sectors include Pharma, Consumption, Infotech, Petroleum and Consumer Durables.
Suitability
MAEBF has been able to take advantage of investment opportunities to reward investors across market phases and cycles. It maintains a well-diversified portfolio of stocks across sectors and market capitalisation while keeping risk in check. However, with a major part of its portfolio exposed to Financials, volatility cannot be ruled out. This along with substantial allocation towards mid and small caps makes it suitable for investors with high risk appetite and a long term 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
