Large-cap indices such as the S&P BSE Sensex and Nifty 50 have more than doubled since the March 2020 low. Despite this sharp rally, many large-cap funds have underperformed their respective benchmarks.

This has prompted some investors to shift to riskier but high return potential categories such as Mid-cap Funds and Small-cap Funds. However, going ahead if the market corrects, mid-cap and small-cap funds are likely to be worst affected. On the other hand, investment in large-cap mutual funds can provide stability and better protection against volatility.

Notably, the Indian equity market will continue to offer alpha generating opportunities that the fund managers of actively managed large-cap funds can take advantage of. Many well-managed large-cap funds have created significant wealth for investors and could potentially continue to do so in the future.

Mirae Asset Large Cap Fund is one such large-cap fund. The fund has generated market-beating returns and rewarded investors with superior risk-adjusted returns over the long term.

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

Data as on November 09, 2021
(Source: ACE MF) 

Mirae Asset Large Cap Fund is a large-cap biased mutual fund that focuses on generating long term capital appreciation through diversification across stocks of quality large sized companies. The fund holds a spectacular performance track record since its inception in April 2008.Mirae Asset Large Cap Fund holds a well-diversified portfolio spread across stocks and sectors which helps it efficiently deal with market fluctuations. The prudent investment strategies that the fund follows has helped it to earn a tag of being a consistent performer. Mirae Asset Large Cap Fund has not only delivered superior returns during market rallies but has also performed well in depressed market conditions. In the current bull phase, the fund stands among the top performers in the large cap funds category. Over the last 5 years, Mirae Asset Large Cap Fund has appreciated at a CAGR of around 18.6%, as against 17.6% CAGR delivered by the current benchmark Nifty 100 – TRI index. An investment of Rs 10,000 in Mirae Asset Large Cap Fund would now have appreciated to Rs 23,521.

Table: Mirae Asset Large Cap Fund’s performance vis-a-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	5,070	46.53	29.35	25.38	20.11	15.65	18.58	0.32
Axis Bluechip Fund	33,967	42.77	24.86	24.70	21.02	15.67	17.23	0.32
Kotak Bluechip Fund	3,456	49.73	27.43	23.60	17.87	14.82	20.77	0.27
BNP Paribas Large Cap Fund	1,265	43.67	24.32	23.34	17.63	14.21	18.43	0.29
UTI Mastershare	9,726	52.09	28.86	22.67	17.95	14.15	19.84	0.27
Mirae Asset Large Cap Fund	30,804	47.59	25.25	21.60	18.64	16.22	21.02	0.25
SBI BlueChip Fund	32,031	51.18	25.28	21.13	16.29	14.82	21.70	0.24
ICICI Pru Bluechip Fund	31,082	51.44	25.34	20.03	17.41	14.17	20.97	0.22
Aditya Birla SL Frontline Equity Fund	22,461	51.29	25.33	19.86	15.82	13.70	21.35	0.22
HDFC Top 100 Fund	21,596	54.41	20.92	16.78	15.37	11.80	23.32	0.18
Nifty 100 – TRI		47.49	24.51	20.49	17.58	13.38	21.25	0.23

Returns are point to point and in %, calculated using Direct Plan – Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on November 09, 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.

Mirae Asset Large Cap Fund has constantly ranked among the list of top quartile performers across various time periods in the past. While the fund has managed to match the benchmark returns in the short term, over longer time periods of 5 to 7 years it has generated a decent alpha of around 1 to 3 percentage points over the benchmark. Moreover, Mirae Asset Large Cap Fund has managed to stand strong even when most its large cap peers have failed to keep pace with the benchmark.

With a Standard Deviation of 21.02%, Mirae Asset Large Cap Fund’s volatility has been nearly in line with the benchmark index. Moreover, the Sharpe Ratio of the fund is ahead of the benchmark and many of its category peers. Its ability to deliver superior risk-adjusted returns, while limiting the downside risk is something that differentiates the fund from the rest.

Investment strategy of Mirae Asset Large Cap Fund

Mirae Asset Large Cap Fundhas a mandate to invest at least 80% of its assets in large cap stocks (i.e. Top 100 companies by market capitalization), and aims to combine consistency of large caps with few conviction midcap ideas (upto 20%). It has the flexibility to invest across sectors and themes.

Mirae Asset Large Cap Fund 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 investment approach of the fund is centred around participating in high quality businesses upto a reasonable price and holding the same over an extended period of time. The scheme tries to identify companies which have sustainable competitive advantage i.e. stocks which have strong pricing power and are sector leaders.

Aiming to outperform the benchmark, the fund managers follow a rigorous investment process that leads to alpha generation. They resist from chasing market momentum and stay fully invested at most times.

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

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

Mirae Asset Large Cap Fund invests in a well-diversified portfolio of about 50-65 stocks. As of October 31, 2021, Mirae Asset Large Cap Fund held around 61 stocks in its portfolio. Its major exposure is in highly liquid large cap names like Infosys, ICICI Bank, HDFC Bank, Reliance Industries, and SBI together accounting for around 30.8% of its assets. Axis Bank, TCS, Bharti Airtel, L&T, and HUL stood among the other top holdings in the fund’s portfolio. Most of these names have been prominent candidates in the fund’s portfolio for well over 2 years now.

In the last one year, Mirae Asset Large Cap Fund has made the most of the rally in large cap stocks and has benefited from its prominent holdings in stocks like ICICI Bank, Infosys, SBI, HDFC Bank, L&T, Reliance Industries, and Bharti Airtel that have together contributed over 25% to its returns.

In terms of sector, around 34.7% of the fund’s portfolio is currently skewed towards Banking and Finance stocks, followed by Infotech, Petroleum Products, Pharma, Consumption, and Auto together accounting for another 40% of the portfolio. The remaining portion of the fund’s portfolio is diversified across range of sectors like Engineering, Telecom, Consumer Durables, Cement, Power, among others.

Suitability

Mirae Asset Large Cap Fund has a track record of delivering superior performance over longer time periods. The fund manager takes cyclical bets that helps the fund to generate alpha during economic recovery phase, whereas the allocation to defensives helps tackle the volatility and limit downsides.

Mirae Asset Large Cap Fund holds a well-diversified portfolio spread across stocks and sectors which helps it efficiently deal with market fluctuations. This bodes well with the large-cap allocation that further increases the stability of the portfolio and performance. The fund is nimble in its approach and has a history of taking timely sector bets.

This makes Mirae Asset Large Cap Fund suitable for investors seeking a well-managed and relatively stable large-cap 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