Large-cap funds aim to provide you, the investor, an opportunity to tap the growth potential of large-sized companies that are usually leaders in their respective field. These companies have a large scale of operation along with the competitive advantage and high governance standards. Therefore, these companies are less likely to be impacted by economic slowdown.

Large-cap stocks are highly liquid compared to mid and small-cap stocks — liquidity is a very important aspect during tough market conditions. Due to these factors, a large-cap fund can offer growth with stability and it can, therefore, form part of the core portfolio of every investor.

Even if you are an aggressive investor and are willing to take high risk for high returns, it is advisable to have significant exposure to large-cap funds. It will not only add stable growth to the portfolio, but also prove rewarding during volatile market conditions.

Mirae Asset Large Cap Fund (MALCF) is one such large cap fund that has proven its ability to constantly limit downside and cap losses during market downturn and generate superior returns during market rallies.

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

Data as on May 26, 2021
(Source: ACE MF) 

Mirae Asset Large Cap Fund (MALCF) is one of those schemes that need no introduction. The fund’s impressive long term performance track record speaks for itself. Primarily an opportunities style fund, MALCF always had flexibility to invest in stocks of companies across market capitalizations and sectors depending on their attractiveness, but maintained a large-cap bias in its portfolio. The change in its mandate to large cap fund in 2018 has not impacted the core investment style of the fund because it still aims to help investors gain from sector and stock specific opportunities, while its portfolio continues to be biased towards large caps. The prudent investment strategies the fund follows has earned it a tag of being a consistent performer that has rewarded long-term investors well across market cycles. Over the last 5 years, MALCF has appreciated at a CAGR of around 16.9%, as against 15.2% delivered by its benchmark Nifty 100 – TRI index, thus generating an alpha of nearly 2 percentage points.

Table: Mirae Asset Large Cap 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
Canara Rob Bluechip Equity Fund	2,477	63.96	21.82	18.16	18.11	15.05	19.46	0.187
Axis Bluechip Fund	25,183	56.61	18.54	16.56	17.62	15.14	18.13	0.177
Kotak Bluechip Fund	2,411	71.33	18.57	15.20	14.92	14.81	21.75	0.136
BNP Paribas Large Cap Fund	1,030	58.16	17.77	15.09	14.52	14.70	19.15	0.147
Mirae Asset Large Cap Fund	23,993	70.18	15.69	14.89	16.94	16.52	21.59	0.135
IDBI India Top 100 Equity Fund	426	67.12	19.14	14.20	14.15	13.72	20.50	0.125
UTI Mastershare	7,734	68.19	17.88	14.17	14.84	13.92	20.58	0.129
PGIM India Large Cap Fund	307	66.70	15.74	13.91	14.05	13.74	20.56	0.123
Franklin India Bluechip Fund	5,911	78.62	17.56	13.78	13.21	13.23	23.38	0.110
Edelweiss Large Cap Fund	236	67.02	16.38	13.58	15.18	14.02	21.13	0.127
Nifty 100 – TRI		70.02	15.21	13.69	15.18	12.77	21.88	0.119

Returns are point to point and in %, calculated using Direct Plan – Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on May 26, 2021
(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 is known for its ability to deliver superior risk-adjusted returns across bull and bear market phases. It has consistently found place among above-average performers in the category across various time frames. Over 5-year and 7-year periods, the fund has managed to generate a decent alpha of around 2-4 percentage points over the benchmark. Even over the shorter time horizon of 1 year to 3 years, its performance compared to the benchmark and many of its peers is respectable.

With a Standard Deviation of 21.59, the fund’s volatility has been nearly in line with the benchmark as well as the category average. Moreover, the Sharpe Ratio of the fund is among the best in the category, and higher than the benchmark.

Investment strategy of Mirae Asset Large Cap Fund

Categorised as a large cap fund, MALCF is mandated to invest minimum 80% of its assets in equity and equity related instruments of large-cap companies, i.e. top 100 companies in terms of market capitalisation. MALCF follows a combination of the top-down and bottom-up approach to stock picking and endeavours to invest in companies which have a chance of benefiting from economic growth and structural changes happening in the country.

The fund has proven its ability to timely identify sector and stock specific opportunities. However, its major focus will remain towards companies qualifying under large caps. Aiming to outperform the benchmark, the fund managers follow a rigorous investment process that leads to alpha generation. They look at businesses based on various quantitative and qualitative parameters and give high importance to quality and scalable businesses run by credible management. While picking stocks for the portfolio, the fund managers look for growth businesses and evaluate the value before buying into them.

MALCF usually holds a large-cap bias with some allocation towards mid-cap stocks and invests in a well-diversified portfolio of about 55-65 stocks. The fund resists from following any market momentum and stays fully invested at most of the times.

Graph 2: Top portfolio holdings in Mirae Asset Large Cap Fund

Holding in (%) as on April 30, 2021
(Source: ACE MF) 

As of April 30, 2021, MALCF held a well-diversified portfolio of 55 stocks. It held major exposure in highly liquid large cap names like Infosys, HDFC Bank, ICICI Bank, and Reliance Industries together accounting for around 36.3% of its assets. TCS, Axis Bank, Bharti Airtel, HUL, SBI and Dr Reddy’s Laboratories are among the other top holdings in the fund’s portfolio. Many of the stocks are part of its portfolio for around 2 years or more which shows the conviction the fund manager has in his stock selection.

In the last one year, MALCF has benefited from its prominent holdings in stocks like Infosys, HDFC Bank, ICICI Bank, Reliance Industries, SBI, Axis Bank, among others that have turned out to be the top gainers in its portfolio.

In terms of sector, around one third of the fund’s portfolio is currently skewed towards Banking and Finance stocks, followed by Infotech, Petroleum Products, Consumption, Pharma, and Auto together accounting for another 48% of the portfolio. The remaining portion of the fund’s portfolio is diversified across range of sectors like Engineering, Telecom, Consumer Durables, Power, Cement, Construction, among others.

Suitability

MALCF has a history of taking timely sector bets. The fund manager takes cyclical bets that help increase the returns generated by the fund during economic recovery, whereas the allocation to defensives helps tackle the volatility and limit downsides.

The fund combines the consistency and stability of large caps with a few high conviction mid-cap ideas. In addition, it holds a well-diversified portfolio, spread across stocks and sectors, that helps it efficiently deal with market fluctuations. The fund has the potential to not only outperform the benchmark, but also its category peers across longer time periods.

This makes MALCF suitable for investors seeking a well-managed and relatively stable fund for long term wealth creation.

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