Our buying decisions are often influenced by brand popularity. When it comes to investing in mutual funds, many of us prefer funds that have wide acceptance. However, you would be surprised to know, some of the popular schemes that have completed a long-term track record underperformed the benchmark index as well as the category average returns.
On the contrary, some small-sized, undiscovered funds have the potential to generate superior returns as compared to their large-sized peers. Therefore, it is important to judge mutual funds based on various quantitative and qualitative parameters rather than popularity.
Canara Robeco Bluechip Equity Fund (CRBEF) is one such less known fund that has clearly beaten its giant-sized peers in the recent crash and showcased its high growth potential over the last one year.
Graph 1: Growth of Rs 10,000 if invested in Canara Robeco Bluechip Equity Fund 5 years ago
Data as on July 29, 2020
(Source: ACE MF)
CRBEF has been an average-performing large cap fund that remained mute for a major tenure of its existence, and managed to deliver returns just in line with the category average. However, the fund’s strategy of sticking to index heavy weights that have been driving the index over the last couple of years has turned in its favour and paid-off investors with superior returns. In the recent market crash, the fund managed to limit the downside, generating noticeable alpha over the index, and improved its overall performance as well. Over the last 5-year period, CRBEF has registered a compounded annualised return of around 9.5%, as against 7.2% CAGR delivered by its benchmark S&P BSE 100 – TRI index. Clearly, CRBEF’s recent extra-ordinary performance, supported by its ability to manage downsides, helped it find a space in the list of top category performers.
Table: Canara Robeco Bluechip Equity Fund’s performance vis-à-vis category peers
|Scheme Name||Corpus (Cr.)||1 Year (%)||2 Year (%)||3 Year (%)||5 Year (%)||7 Year (%)||Std Dev||Sharpe|
|Axis Bluechip Fund||14,522||6.42||4.44||10.46||10.33||14.77||17.12||0.102|
|Canara Rob Bluechip Equity Fund||533||11.11||5.92||8.73||9.44||13.58||18.48||0.072|
|BNP Paribas Large Cap Fund||782||6.26||4.98||5.92||7.19||14.33||18.42||0.025|
|Edelweiss Large Cap Fund||177||4.47||0.68||5.66||7.20||12.74||20.36||0.030|
|Invesco India Largecap Fund||208||4.64||0.60||5.08||7.74||13.70||20.05||0.019|
|Mirae Asset Large Cap Fund||16,381||1.49||2.51||5.06||9.44||17.01||21.02||0.025|
|JM Large Cap Fund||513||6.98||3.75||4.41||5.86||11.85||9.80||-0.029|
|IDFC Large Cap Fund||439||6.02||0.91||4.35||7.58||10.89||19.74||0.003|
|Kotak Bluechip Fund||1,502||4.97||1.42||4.35||7.03||12.86||20.98||0.008|
|LIC MF Large Cap Fund||336||2.71||1.34||3.89||5.77||11.87||18.51||0.004|
|S&P BSE 100 – TRI||1.01||0.04||4.05||7.19||11.42||21.14||0.012|
Returns are point to point and in %, calculated using Direct Plan – Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on July 29, 2020
(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.
CRBEF’s high growth potential is clearly visible in the performance table above. The superior performance registered by the fund over the last year has helped improve its overall returns as well. With this the fund has achieved a mark of significantly outpacing the benchmark and prominent category peers across time periods. Axis Bluechip Fund, BNP Paribas Large Cap Fund, and Edelweiss Large Cap Fund are some of the other top performers in the category.
This outperformance has come at a far reasonable risk when compared to the benchmark and category average. The fund’s Standard Deviation (18.48%, annualised) is much lower than its benchmark (21.14%, annualised) as well as the category average. In terms of risk-adjusted returns (as denoted by the Sharpe), CRBEF has shown significant, thus outperforming its benchmark as well as the category average by a noticeable margin.
Investment strategy of Canara Robeco Bluechip Equity Fund
Categorised under large cap funds, CRBEF is mandated to invest a minimum 80% of its assets in large-cap stocks. Accordingly, it focuses on bluechip companies and invests in stocks of companies figuring in the list of top 100 companies, based on market capitalisation.
While selecting stocks for the portfolio, the fund focuses on companies and sectors that are expected to perform better than the general market and uses inputs from an internal quant model to identify investable companies. The fund follows a blend style of investing, i.e. it looks for high growth stocks available at fair valuation and stays invested for the long term.
The fund manager aims to invest in large sized companies with an established business presence, good reputation and solid brand equity. CRBEF usually holds about 35-40 stocks in its portfolio and follows a buy and hold investment strategy, which reflects the strong long-term conviction the fund management has when it picks stocks for the portfolio.
Graph 2: Top portfolio holdings in Canara Robeco Bluechip Equity Fund
Holding in (%) as on June 30, 2020
(Source: ACE MF)
CRBEF usually holds a fairly-diversified portfolio of about 35 to 40 stocks. As on June 30, 2020, the fund held 41 stocks in its portfolio spread across sectors. The top 10 stock holdings accounted for about 49.3% of the portfolio. Index heavyweights like HDFC Bank, Reliance Industries, Infosys, and ICICI Bank currently find place in the top 5 portfolio holdings.
In the last one year, the fund benefitted immensely from its holdings in Abbott India, Reliance Industries, Bharti Airtel, Dr Reddy’s Lab, Divi’s Lab, Nestle India, HUL, etc. However, stocks like L&T, Axis Bank, ICICI Bank, HDFC Bank, ITC, HDFC, etc. eroded some of its gains.
Among sector holdings, CRBEF’s portfolio has major exposure to Banking and Finance with a combined allocation of about 30%. Additionally, it has other prominent sectors such as, Consumption, Infotech, Pharma, Petroleum, Auto and Telecom in the portfolio with an exposure of approximately 5% to 15% in each one.
CRBEF has evolved in terms of performance by distinctly outperforming the benchmark, as well as most of its large-sized peers even in depressing conditions. This gives investors the confidence of investing in the fund for the long term. Backed by well-defined investment process, CRBEF has the ability to timely pick quality names having high growth potential, and deliver market-beating returns in the long run at a reasonable level of risk.
However, its high concentration towards few sectors can add to volatility in the short term. It is suitable for long-term investors having preference for stability of large caps along with potential to generate decent alpha in terms of returns.
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