Continuing the positive momentum, large cap indices — S&P BSE Sensex and Nifty 50 hit new record highs today. Despite the sharp rally, the large-cap segment has underperformed the mid-cap and small-cap segment in the last one year. However, since large-caps have the capability to withstand market volatility, large-cap mutual funds should form a core part of every individual’s portfolio.

The margin of safety across market caps has narrowed. In the foreseeable future, if the investor sentiments turn negative, mid-cap and small-cap indices could plunge lower than large-caps. Therefore, if your investment horizon is less than 7 years, consider trimming allocation towards risky categories such as mid-cap and small-cap funds. Gradually shift allocation from these mutual funds to large-cap funds.

Large-cap funds have the ability to provide stability to the portfolio along with steady growth of capital. Investing in a large-cap fund that has a well-diversified portfolio of stocks and sectors can help mitigate the impact of any potential risk.

Canara Robeco Bluechip Equity Fund is a large-cap fund that has clearly outpaced its giant-sized peers over the last couple of years.

Graph 1: Growth of Rs 10,000 if invested in Canara Robeco Bluechip Equity Fund 5 years ago

Data as on August 11, 2021
(Source: ACE MF) 

Canara Robeco Bluechip Equity Fund is a small-sized large-cap mutual fund that has only recently began to figure on the radar of investors. Launched over a decade back in August 2010, Canara Robeco Bluechip Equity Fund remained an average performer in the large-cap funds category for a major tenure of its existence. However, the fund has shown a complete turnaround performance in the last couple of years. The fund’s strategy of sticking to index heavy-weights that have been driving the index over the last couple of years has worked in its favour and paid-off investors with superior returns. In the recent market crash, the fund managed to limit downside and generated an alpha of over 7.5 percentage points when compared to the index. This helped improve its overall performance. Over the last 5-years, Canara Robeco Bluechip Equity Fund has registered a compounded annualised growth rate (CAGR) of around 17.9%, outpacing its benchmark S&P BSE 100 – TRI index by about 3 percentage points.

Table: Canara Robeco Bluechip Equity Fund’s performance vis-á-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	3,691	45.76	28.81	18.34	17.87	15.85	19.56	0.21
Axis Bluechip Fund	29,161	42.22	22.91	16.35	18.30	16.02	18.24	0.18
BNP Paribas Large Cap Fund	1,129	41.49	22.82	16.12	14.80	14.44	19.26	0.18
Kotak Bluechip Fund	2,945	49.24	26.66	15.78	15.15	15.24	21.88	0.17
IDBI India Top 100 Equity Fund	486	50.22	26.48	15.72	13.95	14.11	20.71	0.17
Mirae Asset Large Cap Fund	27,435	45.55	23.65	15.46	16.76	16.59	21.72	0.17
UTI Mastershare	8,580	49.65	25.07	14.83	14.98	14.04	20.70	0.16
SBI BlueChip Fund	29,244	48.56	23.49	14.41	13.76	15.19	22.60	0.14
Invesco India Largecap Fund	369	45.96	24.36	14.23	14.83	15.12	21.03	0.15
LIC MF Large Cap Fund	568	42.61	21.46	14.15	13.66	13.24	19.85	0.15
S&P BSE 100 – TRI		46.51	22.85	13.68	14.94	13.01	22.16	0.14

Returns are point to point and in %, calculated using Direct Plan – Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on August 11, 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.

From the performance table above, Canara Robeco Bluechip Equity Fund’s high growth potential and extraordinary performance registered in the last few years is clear. The fund now ranks among the top quartile performers in the large-cap funds category across most time period. The returns generated by Canara Robeco Bluechip Equity Fund over the 2-year to 7-year period has been far better than the benchmark as well as many of its prominent peers. During this period it managed to generate an alpha at a CAGR of about 3 to 6 percentage points.

This outperformance has come at a far reasonable risk when compared to the benchmark and category average. The fund’s Standard Deviation (19.56%, annualised) is much lower than its benchmark (22.16%) as well as the category average (21.04%). Canara Robeco Bluechip Equity Fund has shown significant improvement in its risk-adjusted returns. Its Sharpe ratio is currently the best in the large-cap funds category.

Investment strategy of Canara Robeco Bluechip Equity Fund

Being a large-cap fund, Canara Robeco Bluechip Equity Fund has a mandate to invest a minimum 80% of its assets in large-cap stocks. Accordingly, it invests in top 100 companies based on market capitalisation. While selecting stocks for the portfolio, the fund focuses on companies and sectors that have the potential to perform better than the general market. It uses inputs from 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.

While building portfolio, Canara Robeco Bluechip Equity Fund follows a 3 step investment process designed to achieve the investment objective in a disciplined manner.

Step 1 – Idea generation from the investment universe

Step 2 – Screening process to shortlist investible ideas

Step 3 – Finalising the portfolio.

In the screening process, the fund manager gives weightage to competent management, robust business fundamentals, and reasonable valuations. The fund manager aims to invest in large-sized companies with an established business presence, good reputation and solid brand equity. Canara Robeco Bluechip Equity Fund usually holds about 45-50 stocks in its portfolio. The fund had a reasonable turnover ratio in a range of 40-50% in the last one year.

Graph 2: Top portfolio holdings in Canara Robeco Bluechip Equity Fund

Holding in (%) as on July 31, 2021
(Source: ACE MF) 

Canara Robeco Bluechip Equity Fund usually holds a fairly-diversified portfolio of about 45 to 50 stocks. As on July 31, 2021, the fund held 48 stocks in its portfolio spread across sectors. The top 10 stock holdings account for around 49.1% of the portfolio. Index heavyweights like Infosys, HDFC Bank, ICICI Bank, Reliance Industries, and TCS currently find place in the top 5 portfolio holdings. L&T, HDFC, SBI, Bajaj Finance, and Axis Bank are among other stocks that form part of the core holdings of the fund.

Canara Robeco Bluechip Equity Fund’s bet on companies like Infosys, ICICI Bank, HDFC Bank, Bajaj Finance, Divi’s Laboratories, etc. has turned out to be rewarding for the fund in the last one year. Ultratech Cement, L&T, TCS, Axis Bank, Gujarat Gas, HDFC, Voltas, are among the other stocks that contributed to its gains.

Canara Robeco Bluechip Equity Fund’s portfolio has major exposure to stocks in the Banking & Finance sector where it has allocated 34.7% of its assets. Infotech, Consumption, Pharma, Petroleum, Engineering, and Cement are the other prominent sectors in the portfolio with an exposure of about 4% to 15% in each. The top 5 sectors in Canara Robeco Bluechip Equity Fund’s portfolio together account for around 64% of its assets.

Suitability

Canara Robeco Bluechip Equity Fund’s performance has evolved over the last few years. It has distinctly outperformed the benchmark, as well as most of its large-sized peers even in depressed conditions.

Canara Robeco as a fund house employs sound risk management techniques and has been efficient in managing the downside risk across schemes. Accordingly, Canara Robeco Bluechip Equity Fund has stood strong during bear market phases and has done well to limit losses in the past. Canara Robeco Bluechip Equity Fund has the ability to timely pick quality names that have the potential to deliver market-beating returns in the long run.

Despite its small corpus, the fund is well placed to compete with its giant-sized peers and generate market beating returns in the long run. It is suitable for long-term investors looking to earn decent alpha and benefit from the stability of large caps.

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